EXHIBIT 10.31
[LOGO]
BUSINESS LOAN AGREEMENT (ASSET BASED)
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
$2,000,000.00 06-14-2004 10-31-2005 9001 3560802 146
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing "**"" has been omitted due to text length limitations.
BORROWER: DESIGN TRENDS. LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO, TX 78296
THIS BUSINESS LOAN AGREEMENT (ASSET BASED) DATED JUNE 14, 2004, IS MADE AND
EXECUTED BETWEEN DESIGN TRENDS, LLC ("BORROWER") AND THE FROST NATIONAL BANK
("LENDER") ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR
COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR
LOANS OR OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED
ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT ("LOAN"). ▇▇▇▇▇▇▇▇
UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN,
▇▇▇▇▇▇ IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS AS
SET FORTH IN THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OR ANY
LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO ▇▇▇▇▇▇'S SOLE JUDGMENT AND
DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND REMAIN SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of June 14, 2004, and shall continue
in full force end effect until such time as all of Borrower's Loans in favor of
Lender have been paid in full, including principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until such time as the parties
may agree in writing to terminate this Agreement.
LINE OF CREDIT. ▇▇▇▇▇▇ agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advance outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows:
CONDITIONS PRECEDENT TO EACH ADVANCE. ▇▇▇▇▇▇'s obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:
(1) Lender shall have received evidence that this Agreement and all
Related Documents have bean duly authorized, executed, and delivered
by Borrower to Lender.
(2) Lender shall have received such opinions of counsel,
supplemental opinions, and documents as ▇▇▇▇▇▇ may request.
(3) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and
shall be in full force and effect.
(4) All guaranties required by Lender for the credit facility(ies)
shall have been executed by each Guarantor, delivered to Lender, and
be in full force and effect.
(5) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts. Inventory, books, records
and operations, and Lender shall be satisfied as to their condition.
(6) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then
due and payable.
(7) There shall not exist at the time of any Advance a condition
which would constitute an Event of Default under this Agreement, and
Borrower shall have delivered to Lender the compliance certificate
called for in the paragraph below titled "Compliance Certificate."
MAKING LOAN ADVANCES. Advances under this credit facility, as well as
directions for payment from ▇▇▇▇▇▇▇▇'s accounts, may be requested orally
or in writing by authorized persons. Lender may. but need not, require
that all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the
benefit of Borrower (1) when credited to any deposit account of Borrower
maintained with Lender or (2) when advanced in accordance with the
instructions of an authorized person. Lender, at its option, may set a
cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay
to Lender an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base. On the
Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid
principal amount of all Advances then outstanding and all accrued unpaid
interest, together with all other applicable fees, costs and charges, if
any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advances and such other debits
and credits as shall be appropriate in connection with the credit
facility. Lender shall provide Borrower with periodic statements of
▇▇▇▇▇▇▇▇'s account, which statements shall be considered to be correct and
Conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after ▇▇▇▇▇▇▇▇'s receipt of any such
statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Primary Credit Facility and performance of
all other Loan, obligations and duties Owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require. Lender's Security Interests in the Collateral
shall be continuing liens and shall include the proceeds and products of the
Collateral, including without limitation the proceeds of any insurance. With
respect to the Collateral, ▇▇▇▇▇▇▇▇ agrees and represents and warrants to
▇▇▇▇▇▇:
PERFECTION OF SECURITY INTERESTS. ▇▇▇▇▇▇▇▇ agrees to execute financing
statements and all documents perfecting ▇▇▇▇▇▇'s Security Interest and to
take whatever other (actions are requested by ▇▇▇▇▇▇ to perfect and
continue lender's Security Interests in the Collateral. Upon
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 2
request of Lender, ▇▇▇▇▇▇▇▇ will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Borrower will
note ▇▇▇▇▇▇'s interest upon any and all chattel paper and instruments. If
not delivered to Lender for possession by ▇▇▇▇▇▇. Contemporaneous with the
execution of this Agreement, ▇▇▇▇▇▇▇▇ will execute one or more UCC
financing statements and any similar statements as may be required by
applicable law, and Lender will file such financing statements and all
such similar statements in the appropriate location or locations. Borrower
hereby appoints ▇▇▇▇▇▇ as its irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to continue any
Security Interest. Lender may at any time, and without further
authorization from Borrower, file a carbon, photograph, facsimile, or
other reproduction of any financing statement for use as a financing
statement. Borrower will reimburse Lender for all expenses for the
perfection, termination, and the continuation of the perfection of
▇▇▇▇▇▇'s security interest in the Collateral. Borrower promptly will
notify Lender before any change in ▇▇▇▇▇▇▇▇'s name including any change to
the assumed business names of ▇▇▇▇▇▇▇▇. Borrower also promptly will notify
Lender before any change in Borrower's Social Security Number or Employer
Identification Number. ▇▇▇▇▇▇▇▇ further agrees to notify ▇▇▇▇▇▇ in writing
prior to any change in address or location of ▇▇▇▇▇▇▇▇'s principal
governance office or should Borrower merge or consolidate with any other
entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or ▇▇▇▇▇▇'s representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, ▇▇▇▇▇▇▇▇ agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings. Records related to Accounts
(Receivables) are or will be located at principal office of Borrower. With
respect to the Inventory, ▇▇▇▇▇▇▇▇ agrees to keep and maintain such
records as Lender may require, including without limitation information
concerning Eligible Inventory and records itemizing and describing the
kind, type, quality, and quantity of Inventory, Borrower's Inventory costs
and selling prices, and the daily withdrawals and additions to Inventory,
Records related to Inventory are or will be located at . The above is an
accurate and complete list of all locations at which Borrower keeps or
maintains business records concerning ▇▇▇▇▇▇▇▇'s collateral.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of
Accounts and Inventory and schedules of Eligible Accounts and Eligible
Inventory in form and substance satisfactory to the Lender. Thereafter
supplemental schedules shall be delivered according to the following
schedule: With respect to Eligible Accounts, schedules shall be delivered
as stated below.
REPRESANTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to the
Accounts, Borrower represents and warrants to Lender: (1) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (2) All Account information listed on schedules delivered to
Lender will be true and correct, subject to immaterial variance; and (3)
Lender, its assigns, or agents shall have the right at any time and at
Borrower's expense to inspect, examine, and audit ▇▇▇▇▇▇▇▇'s records and
to confirm with Account Debtors the accuracy of such Accounts.
REPRESENTATIONS AND WARRANTIES CONCERNING INVENTORY. With respect to the
Inventory, Borrower represents and warrants to Lender: (1) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Inventory; (2) All Inventory values listed on schedule delivered to Lender
will be true and correct, subject to immaterial variance; (3) The value of
the inventory will be determined on a consistent accounting basis; (4)
Except as agreed to the contrary by ▇▇▇▇▇▇ in writing, all Eligible
Inventory is now and at all times hereafter will be in Borrower's physical
possession and shall not be held by others or consignment, sale on
approval, or sale or return; (5) Except as reflected in the Inventory
schedules delivered to Lender, all Eligible Inventory is now and at all
times hereafter will be of good and merchantable quality, free from
defects; (6) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent, and, in such event, Borrower will
concurrently at the time of bailmant cause any such bailee, warehouseman,
or similar party to issue and deliver to Lender, in form acceptable to
Lender, warehouse receipts in Lender name evidencing the storage of
Inventory; and (7) Lender, its assigns, or agents shall have the right at
any time and at ▇▇▇▇▇▇▇▇'s expense to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value, and
condition.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to ▇▇▇▇▇▇'s satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide 10 Lender the following documents
for the Loan: (1) the Note; (2) Security Agreements granting to Lender
security interests in the Collateral; (3) financing statements and all
other documents perfecting Lender's Security Interests; (4) evidence of
insurance as required below; (5) guaranties; (6) together with all such
Related Documents as Lender may require for the Loan; all in form and
substance satisfactory to Lender and ▇▇▇▇▇▇'s counsel.
▇▇▇▇▇▇▇▇'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.
FEES AND EXPENSES UNDER THIS AGREEMENT. Borrower shall have paid to Lender
all fees, costs, and expenses specified in this Agreement and the Related
Documents as are then due and payable.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement
or under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists;
ORGANIZATION. Borrower is a limited liability company which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Delaware. Borrower is duly
authorized to transact business in the State of Texas and all other states
in which Borrower is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Borrower is doing business. Specifically, Borrower is, and at all times
shall be, duly qualified as a foreign limited liability company in all
states in which the failure to so qualify would have a material adverse
effect on its business or financial condition. Borrower has the full power
and authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Borrower
maintains an office at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇. Coppell, TX 75019.
Unless Borrower has designated otherwise in writing, the principal office
is the office at which Borrower keeps its books and records including its
records concerning the Collateral. Borrower will notify Lender prior to
any change in the location of ▇▇▇▇▇▇▇▇'s state of organization or any
change in Borrower's name. Borrower shall do all things necessary to
preserve and to keep in full force and effect its existence, rights and
privileges, and shall
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 3
comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court
applicable to Borrower and ▇▇▇▇▇▇▇▇'s business activities.
ASSUMED BUSINESS NAMES. ▇▇▇▇▇▇▇▇ has filed or recorded all documents or
filings required by law relating to all assumed business names used by
▇▇▇▇▇▇▇▇. Excluding the name of ▇▇▇▇▇▇▇▇, the following is a complete list
of all assumed business names under which Borrower does business: None.
AUTHORIZATION. ▇▇▇▇▇▇▇▇'s execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of (a)
Borrower's articles of organization or membership agreements, or (b) any
agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower or
to Borrower's properties.
FINANCIAL INFORMATION. Each of ▇▇▇▇▇▇▇▇'s financial statements supplied to
▇▇▇▇▇▇ truly and completely disclosed ▇▇▇▇▇▇▇▇'s financial condition as of
the date of the statement, and there has been no material adverse change
in ▇▇▇▇▇▇▇▇'s financial condition subsequent to the date of the most
recent financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will
constitute legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in ▇▇▇▇▇▇▇▇'s financial statements or in writing to Lender and
as accepted by ▇▇▇▇▇▇, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has
not executed any security documents or financing statements relating to
such properties. All of ▇▇▇▇▇▇▇▇'s properties are titled in Borrower's
legal name, and ▇▇▇▇▇▇▇▇ has not used or filed a financing statement under
any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. Except as disclosed to and acknowledged by ▇▇▇▇▇▇ in
writing, Borrower represents and warrants that: (1) During the period of
Borrower's ownership of Borrower's Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under,
about or from any of the Collateral. (2) Borrower has no knowledge of, or
reason to believe that there has been (a) any breach or violation of any
Environmental Laws; (b) any use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any Hazardous
Substance on, under, about or from the Collateral by any prior owners or
occupants of any of the Collateral; or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters,
(3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store,
treat, dispose of or release any Hazardous Substance on, under, about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation all
Environmental Laws. Borrower authorizes Lender and its agents to enter
upon the Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with this section of
the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence in investigating
the Collateral for hazardous waste and Hazardous Substances. Borrower
hereby (1) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for cleanup
or other costs under any such laws, and (2) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal,
release or threatened release of a hazardous waste or substance on the
Collateral. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness and
the termination, expiration or satisfaction of this Agreement and shall
not be affected by ▇▇▇▇▇▇'s acquisition of any interest in any of the
Collateral, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, Investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by ▇▇▇▇▇▇ in writing.
TAXES. To the best of ▇▇▇▇▇▇▇▇'s knowledge, all of ▇▇▇▇▇▇▇▇'s tax returns
and reports that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full except those presently being or to be contested by Borrower in good
faith in the ordinary course of business and for which adequate reserves
have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
▇▇▇▇▇▇▇▇ has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security interests on or
effecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof, as
well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with ▇▇▇▇▇▇ that, so long
as this Agreement remains in effect. Borrower will:
NOTICES OF CLAIMS AND LITIGATION. Promptly inform ▇▇▇▇▇▇ in writing of (1)
all material adverse changes in Borrower's financial condition, and (2)
all existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit ▇▇▇▇▇▇ to examine and audit
▇▇▇▇▇▇▇▇'s books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with the following:
ANNUAL STATEMENTS. As soon as available, but in no event later than
one-hundred-twenty (120) days after the and of each fiscal year,
▇▇▇▇▇▇▇▇'s balance sheet and income statement for the year ended.
audited by a certified public accountant satisfactory to Lender.
INTERIM STATEMENTS. As soon as available, but in no event later than
SIXTY (60) days after the end of each fiscal quarter, Borrower's
balance sheet and profit and loss statement for the period ended,
prepared by ▇▇▇▇▇▇▇▇.
All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 4
basis, and certified by Borrower is being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements, as
▇▇▇▇▇▇ may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios:
WORKING CAPITAL REQUIREMENTS. Borrower shall comply with the following
working capital ratio requirements:
CURRENT RATIO. Maintain a Current Ratio in excess of 2.000 to 1.000.
The term "Current Ratio" means Borrower's total Current Assets
divided by Borrower's total Current Liabilities. This liquidity
ratio will be evaluated as of quarter-end.
TANGIBLE NET WORTH REQUIREMENTS. Borrower shall comply with the following
net worth ratio requirements:
DEBT / WORTH RATIO. Maintain a ratio of Debt / Worth not in excess
of 2.500 to 1.000. The ratio "Debt / Worth" means Borrower's Total
Liabilities divided by Borrower's Tangible Net Worth. This leverage
ratio will be evaluated as of quarter-end.
Except as provided above, all computations made to determine compliance
with the requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, and coverages reasonably acceptable
to Lender and by insurance companies authorized to transact business in Texas.
BORROWER MAY FURNISH THE INSURANCE REQUIRED BY THIS AGREEMENT WHETHER THROUGH
EXISTING POLICIES OWNED OR CONTROLLED BY BORROWER OR THROUGH EQUIVALENT COVERAGE
FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS. Borrower,
upon request of ▇▇▇▇▇▇, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lander, including stipulations
that coverages will not be cancelled or diminished without at least ten (10)
days prior written notice to Lender. Each Insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans. Borrower will provide Lender with such
lender's loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) The name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of ▇▇▇▇▇▇, executed by the guarantors named
below, on ▇▇▇▇▇▇'s forms, and in the amounts and under the conditions set forth
in those guaranties.
Names of Guarantors Amount
------------------- ------
Craftmade International, Inc. 50.000% of all Indebtedness or $1,000,000.00, whichever is less
▇▇▇▇▇ NORTHWEST, LLC 50.000% of all Indebtedness or $1,000,000.00, whichever is less
OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for the following specific purposes:
REVOLVING LINE OF CREDIT TO SUPPORT ACCOUNTS RECEIVABLE AND/OR INVENTORY.
TAXES, CHARGES AND LIENS. 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.
PERFORMANCE. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify ▇▇▇▇▇▇ immediately in writing of any default in connection with any
agreement.
OPERATIONS. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner.
ENVIRONMENTAL STUDIES. Promptly conduct and complete, at Borrower's expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower's properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in ▇▇▇▇▇▇'s sole opinion, ▇▇▇▇▇▇'s
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect ▇▇▇▇▇▇'s interest,
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and ▇▇▇▇▇▇▇▇'s other
properties and to examine or audit ▇▇▇▇▇▇▇▇'s books, accounts, and records and
to make copies and memoranda of ▇▇▇▇▇▇▇▇'s books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of ▇▇▇▇▇▇, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATES. Unless waived in writing by ▇▇▇▇▇▇, provide Lender
within thirty (30) days after the end of each month, with a certificate executed
by ▇▇▇▇▇▇▇▇'s chief financial officer, or other officer or person acceptable
to ▇▇▇▇▇▇, certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further
certifying that, as of the date of
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 5
the certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or omission
on Borrower's part or on the part of any third party, on property owned
and/or occupied by Borrower, any environmental activity where damage may
result to the environment, unless such environmental activity is
pursuant to and in compliance with the conditions of a permit issued by
the appropriate federal, state or local governmental authorities: shall
furnish to Lender promptly and in any event within thirty (30) days after
receipt thereof a copy of any notice, summons, lien, citation, directive,
letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or
omission on Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural
resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure the
Loans and to perfect all Security Interests.
▇▇▇▇▇▇'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's Interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures paid by Lender for such purposes will then bear interest at the
Note rate from the date paid by Lender to the date of repayment by ▇▇▇▇▇▇▇▇. To
the extent permitted by applicable law, all such expenses will become a part of
the indebtedness and, at Lender's option, will (A) be payable on demand; (B) be
added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
INDEBTEDNESS AND LIENS. (1) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (2) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets
(except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower's accounts, except to ▇▇▇▇▇▇.
CONTINUITY OF OPERATIONS. (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, or (3) make any
distribution with respect to any capital account, whether by reduction of
capital or otherwise.
LOANS, ACQUISITIONS AND GUARANTIES. (1) Loan, invest in or advance money
or assets to any other person, enterprise or entity, (2) purchase, create
or acquire any interest in any other enterprise or entity, or (3) incur
any obligation as surety or guarantor other than in the ordinary course of
business.
AGREEMENTS. Borrower will not enter into any agreement containing any
provisions which would be violated or breached by the performance of
Borrower's obligations under this Agreement or in connection herewith.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good ▇▇▇▇▇ ▇▇▇▇▇ itself insecure, even though no Event of Default shall have
occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. ▇▇▇▇▇▇▇▇ authorizes ▇▇▇▇▇▇, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
PAYMENT DEFAULT. ▇▇▇▇▇▇▇▇ fails to make any payment when due under the
Loan.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's or any Grantor's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.
DEATH OR INSOLVENCY. The dissolution of Borrower (regardless of whether
election to continue is made), any member withdraws from Borrower, or any
other termination of Borrower's existence as a going business or the
death of any member, the insolvency of Borrower, the appointment of a
receiver for any part of ▇▇▇▇▇▇▇▇'s property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or
lien) at any time and for any reason.
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 6
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Loan. This
includes a garnishment of any of ▇▇▇▇▇▇▇▇'s accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by ▇▇▇▇▇▇▇▇ as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives ▇▇▇▇▇▇ written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or ▇▇▇▇▇▇ believes the prospect of payment or performance of
the Loan is impaired.
INSECURITY. Lender in good faith believes itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by ▇▇▇▇▇▇ to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect ▇▇▇▇▇▇'s
right to declare a default end to exercise its rights and remedies.
WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.
FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document 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 fax 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.
BORROWING BASE CERTIFICATES AND ACCOUNTS RECEIVABLE AGING REPORTS. Borrower
shall furnish to Lender monthly borrowing base certificates and an aging of
trade accounts receivable within thirty (30) days after the end of each month.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES: EXPENSES. ▇▇▇▇▇▇▇▇ agrees to pay upon demand all of
▇▇▇▇▇▇'s costs and expenses, including ▇▇▇▇▇▇'s reasonable attorneys' fees
and ▇▇▇▇▇▇'s legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include ▇▇▇▇▇▇'s reasonable attorneys'
fees and legal expenses whether or not there is a lawsuit, including
▇▇▇▇▇▇'s reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also shall pay all court costs and such additional fees
as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
CONSENT TO LOAN PARTICIPATION. ▇▇▇▇▇▇▇▇ agrees and consents to ▇▇▇▇▇▇'s
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy Borrower may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. ▇▇▇▇▇▇▇▇ also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of such
interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce ▇▇▇▇▇▇▇▇'s obligation under
the Loan irrespective of the failure or insolvency of any holder of any
interest in the Loan. ▇▇▇▇▇▇▇▇ further agrees that the purchaser of any
such participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against ▇▇▇▇▇▇.
GOVERNING LAW. This Agreement will be governed by, construed and enforced
in accordance with federal law and the laws of the State of Texas. This
Agreement has been accepted by ▇▇▇▇▇▇ in the State of Texas.
CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
by this Agreement occurred in BEXAR County, ▇▇▇▇▇▇▇▇ agrees upon ▇▇▇▇▇▇'s
request to submit to the jurisdiction of the courts of BEXAR County, State
of Texas.
NO WAIVER BY ▇▇▇▇▇▇. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
▇▇▇▇▇▇. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
▇▇▇▇▇▇ of a provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
▇▇▇▇▇▇, nor any course of dealing between ▇▇▇▇▇▇ and Borrower, or
between Lender and any Grantor, shall constitute a waiver of any of
Lender's rights or of any of Borrower's or any Grantor's obligations as
to any future transactions. Whenever the consent of Lender is required
under this Agreement, the granting of such consent by under in any
instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be
granted or withheld in the sols discretion of Lender.
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 7
NOTICES. Any notice required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its
address for notices under this Agreement by giving formal written notice
to the other parties, specifying that the purpose of the notice is to
change the party's address. For notice purposes, ▇▇▇▇▇▇▇▇ agrees to keep
▇▇▇▇▇▇ informed at all times of ▇▇▇▇▇▇▇▇'s current address. Unless
otherwise provided or required by law, if there is more than one Borrower,
any notice given by Lender to any Borrower is deemed to be notice given to
all Borrowers.
PAYMENT OF INTEREST AND FEES. Notwithstanding any other provision of this
Agreement or any provision of any Related Document. Borrower does not
agree or intend to pay, and ▇▇▇▇▇▇ does not agree or intend to charge,
collect, take, reserve or receive (collectively referred to herein as
"charge or collect"), any amount in the nature of interest or in the
nature of a fee for the Loan which would in any way or event (including
demand, prepayment, or acceleration) cause Lender to contract for, charge
or collect more for the Loan than the maximum Lender would be permitted to
charge or collect by any applicable federal or Texas state law. Any such
excess interest or unauthorized fee will, instead of anything stated to
the contrary, be applied first to reduce the unpaid principal balance of
the Loan, and when the principal has been paid in full, be refunded to
Borrower.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes
legal, valid and enforceable. If the offending provision cannot be so
modified, it shall be considered deleted from this Agreement. Unless
otherwise required by law, the illegality, invalidity, or
unenforceability of any provision of this Agreement shall not affect the
legality, validity or enforceability of any other provision of this
Agreement.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used in this Agreement shall include all of Borrower's subsidiaries
and affiliates. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to make
any Loan or other financial accommodation to any of Borrower's
subsidiaries or affiliates.
SUCCESSORS AND ASSIGNS. All covenants and agreements by or on behalf of
Borrower contained in this Agreement or any Related Documents shall bind
▇▇▇▇▇▇▇▇'s successors and assigns and shall inure to the benefit of Lender
and its successors and assigns. Borrower shall not, however, have the
right to assign ▇▇▇▇▇▇▇▇'s rights under this Agreement or any interest
therein, without the prior written consent of Lender.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. ▇▇▇▇▇▇▇▇ understands and
agrees that in extending Loan Advances, ▇▇▇▇▇▇ is relying on all
representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement or the Related Documents. Borrower further
agrees that regardless of any investigation made by ▇▇▇▇▇▇, all such
representations, warranties and covenants will survive the extension of
Loan Advances and delivery to Lender of the Related Documents, shall be
continuing in nature, shall be deemed made and related by Borrower at the
time each Loan Advance is made, and shall remain in full force and effect
until such time as Borrower's Indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
ACCOUNT. The word "Account" means a trade account, account receivable,
other receivable, or other right to payment for goods sold or services
rendered owing to Borrower (or to a third party grantor acceptable to
Lender).
ADVANCE. The word "Advance" means a disbursement of Loan funds made, or to
be made, to Borrower or on Borrower's behalf under the terms and
conditions of this Agreement.
AGREEMENT. The word "Agreement" means this Business Loan Agreement (Asset
Based), as this Business Loan Agreement (Asset Based) may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Business Loan Agreement (Asset Based) from time to time.
BORROWER. The word "Borrower" means Design Trends, LLC and includes all
co-signers and co-makers signing the Note.
BORROWING BASE. The words "Borrowing Base" mean, as determined by Lender
from time to time, the lesser of (a) $2,000,000.00; or (b) the sum of (i)
80.000% of the aggregate amount of Eligible Accounts; plus (ii) 50,000% of
the aggregate amount of Eligible Inventory. No more than 50,000% of the
Borrowing Base shall be supported by Eligible Inventory.
BUSINESS DAY. The words "Business Day" mean a day on which commercial
banks are open in the State of Texas.
COLLATERAL. The word "Collateral" means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created
by law, contract, or otherwise. The word Collateral also includes without
limitation all collateral described in the Collateral section of this
Agreement.
ELIGIBLE ACCOUNTS. The words "Eligible Accounts' mean at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable
to Lender. The net amount of any Eligible Account against which Borrower
may borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by ▇▇▇▇▇▇ in writing, Eligible
Accounts do not include:
(1) Accounts with respect to which the Account Debtor is a member,
employee or agent of ▇▇▇▇▇▇▇▇.
(2) Accounts with respect to which the Account Debtor is affiliated
with Borrower.
(3) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by
the Account Debtor may be conditional.
(4) Accounts with respect to which the Account Debtor is not a
resident of the United States, except to the extent such Accounts
are
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 8
Supported by insurance, bonds or other assurances satisfactory to Lender.
(5) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor
to Borrower.
(6) Accounts which are subject to dispute, counterclaim, or setoff.
(7) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor.
(8) Accounts with respect to which Lender, in its sole discretion, deems
the creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.
(9) Accounts of any Account Debtor who has filed or has had filed against
it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian, or
receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such debts become
due.
(10) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(11) Accounts which have not been paid in full within 60 days from the
invoice date. The entire balance of any Account of any single Account
Debtor will be ineligible whenever the portion of the Account which has
not been paid within 60 days from the invoice date is in excess of 20.000%
of the total amount outstanding on the Account.
ELIGIBLE INVENTORY, The words "Eligible Inventory" mean at any time, all of
Borrower's Inventory as defined below except:
(1) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.
(2) Inventory which Lender, in its sole discretion, deems to be obsolete,
unsalable damaged, defective, or unfit for further processing.
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), The Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No, 99-499 ("▇▇▇▇"), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et., seq., or
other applicable state or federal laws, rules, or regulations adopted pursuant
thereto.
EVENT OF DEFAULT. The words "Event of Default" mean any of the events of default
set forth in this Agreement in the default section of this Agreement.
EXPIRATION DATE. The words "Expiration Date" mean the date of termination of
▇▇▇▇▇▇'s commitment to lend under this Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
GRANTOR. The word "Grantor" means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including without
limitation all Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means any Guarantor, surety, or accommodation
party of any or all of the Loan.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human
health or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words "Hazardous
Substances" are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances" also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.
INVENTORY. The word "inventory" means all of Borrower's raw materials, work in
process, finished goods, merchandise, parts and supplies, of every kind and
description, and goods held for sale or lease or furnished under contracts of
service in which Borrower now has or hereafter acquires any right, whether held
by Borrower or others, and all documents of title, warehouse receipts, bills of
lading, and all other documents of every type covering all or any part of the
foregoing. Inventory includes inventory temporarily out of ▇▇▇▇▇▇▇▇'s custody
or possession and all returns on Accounts.
LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors and
assigns.
LOAN. The word "Loan" means any and all loans and financial accommodations from
Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to this Agreement from
time to time.
NOTE. The word "Note" means the Note executed by Design Trends, LLC in the
principal amount of $2,000,000.00 dated June 14, 2004, together with all
renewals of, extensions of, modifications of, refinancings of consolidations
of, and substitutions for the note or credit agreement.
PERMITTED LIENS. The words "Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4) purchase money liens or purchase money
security interests upon or in any property acquired or hold by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (6) those liens and security interests which in the aggregate
constitute
BUSINESS LOAN AGREEMENT (ASSET BASED)
(CONTINUED) PAGE 9
an immaterial and insignificant monetary amount with respect to the net
value of ▇▇▇▇▇▇▇▇'s assets.
PRIMARY CREDIT FACILITY. The words "Primary Credit Facility" mean the
credit facility described in the Line of Credit section of this Agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deads of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Loan.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean, without
limitation, any and all types of collateral security, present and future,
whether in the form of a lien, charge, encumbrance, mortgage, deed of
trust, security dead, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor's lien, equipment
trust, conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other security
or lien interest whatsoever whether created by law, contract, or
otherwise.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible
items, but including leaseholds and leasehold Improvements) less total
debt.
▇▇▇▇▇▇▇▇ ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED)AND ▇▇▇▇▇▇▇▇ AGREES TO ITS TERMS. THIS BUSINESS
LOAN AGREEMENT (ASSET BASED) IS DATED JUNE 14, 2004.
BORROWER:
DESIGN TRENDS, LLC
CRAFTMADE INTERNATIONAL, INC. Manager of Design Trends, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of Craftmade
International, Inc.
LENDER:
THE FROST NATIONAL BANK
By: /s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
Authorized Signer
[LOGO]
PROMISSORY NOTE
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
$2,000,000.00 06-14-2004 10-31-2005 9001 3560802 146
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
BORROWER: DESIGN TRENDS, LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO. TX 78296
Principal Amount: $2,000,000.00 Initial Rate: 4.000% Date of Note: June 14, 2004
PROMISE TO PAY. DESIGN TRENDS, LLC ("BORROWER") PROMISES TO PAY TO THE FROST
NATIONAL BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF TWO MILLION & 00/100 DOLLARS ($2,000,000.00) OR
SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING
PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF
EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE OR MATURITY, WHICHEVER OCCURS
FIRST.
CHOICE OF USURY CEILING AND INTEREST RATE. The interest rate on this Note has
been implemented under the "Weekly Ceiling" as referred to in Sections 303.002
and 303.003 of the Texas Finance Code. The terms, including the rate, or index,
formula, or provision of law used to compute the rate on the Note, will be
subject to revision as to current and future balances, from time to time by
notice from Lender in compliance with Section 303.103 of the Texas Finance Code.
PAYMENT. ▇▇▇▇▇▇▇▇ WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON OCTOBER 31, 2005. IN ADDITION, BORROWER WILL
PAY REGULAR MONTHLY PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF EACH
PAYMENT DATE, BEGINNING JULY 31, 2004, WITH ALL SUBSEQUENT INTEREST PAYMENTS TO
BE DUE ON THE LAST DAY OF EACH MONTH AFTER THAT. UNLESS OTHERWISE AGREED OR
REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST TO ANY UNPAID
COLLECTION COSTS; THEN TO ANY LATE CHARGES; THEN TO ANY ACCRUED UNPAID INTEREST;
AND THAN TO PRINCIPAL. THE ANNUAL INTEREST RATE FOR THIS NOTE IS COMPUTED ON A
365/360 BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL INTEREST RATE OVER A
YEAR OF 360 DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL BALANCE, MULTIPLIED BY
THE ACTUAL NUMBER OF DAYS THE PRINCIPAL BALANCE IS OUTSTANDING, UNLESS SUCH
CALCULATION WOULD RESULT IN A USURIOUS RATE, IN WHICH CASE INTEREST SHALL BE
CALCULATED ON A PER DIEM BASIS OF A YEAR OF 365 OR 366 DAYS, AS THE CASE MAY BE.
▇▇▇▇▇▇▇▇ WILL PAY LENDER AT ▇▇▇▇▇▇'S ADDRESS SHOWN ABOVE OR AT SUCH OTHER PLACE
AS ▇▇▇▇▇▇ MAY DESIGNATE IN WRITING.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is ▇▇▇▇▇▇'s Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon ▇▇▇▇▇▇▇▇'s request. The interest rate
change will not occur more often than each day. Borrower understands that Lender
may make loans based on other rates as well. THE INDEX CURRENTLY IS 4.000% PER
ANNUM. THE INTEREST RATE TO BE APPLIED PRIOR TO MATURITY TO THE UNPAID PRINCIPAL
BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN
INITIAL RATE OF 4.000% PER ANNUM. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law. For purposes of this Note, the "maximum rate allowed by applicable law"
means the greater of (A) the maximum rate of interest permitted under federal or
other law applicable to the indebtedness evidenced by this Note, or (B) the
"Weekly Ceiling" as referred to in Sections 303.002 and 303.003 of the Texas
Finance Code.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Prepayment in full shall consist of payment of the
remaining unpaid principal balance together with all accrued and unpaid interest
and all other amounts, costs and expenses for which Borrower is responsible
under this Note or any other agreement with Lender pertaining to this loan, and
in no event will Borrower ever be required to pay any unearned interest. Early
payments will not, unless agreed to by ▇▇▇▇▇▇ in writing, relieve ▇▇▇▇▇▇▇▇ of
▇▇▇▇▇▇▇▇'s obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. ▇▇▇▇▇▇▇▇ agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, ▇▇▇▇▇▇ may accept it without
losing any of ▇▇▇▇▇▇'s rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: THE FROST NATIONAL BANK,
P.O. BOX 1600 SAN ANTONIO, TX 78296.
LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $250.00,
whichever is less.
POST MATURITY RATE. The Post Maturity Rate on this Note is the lesser of the
maximum rate allowed by applicable law or 18.000% per annum. Borrower will pay
interest on all sums due after Final maturity, whether by acceleration or
otherwise, at that rate.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in any
of the related documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or Borrower's
ability to repay this Note or perform Borrower's obligations under this
Note or any of the related documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
PROMISSORY NOTE
(CONTINUED) PAGE 2
DEATH OR INSOLVENCY. The dissolution of Borrower (regardless of whether
election to continue is made), any member withdraws from Borrower, or any
other termination of Borrower's existence as a going business or the death
of any member, the insolvency of Borrower, the appointment of a receiver
for any part of ▇▇▇▇▇▇▇▇'s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of ▇▇▇▇▇▇▇▇'s accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by ▇▇▇▇▇▇▇▇ as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives ▇▇▇▇▇▇ written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the indebtedness evidenced by this Note.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or ▇▇▇▇▇▇ believes the prospect of payment or performance of
this Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, ▇▇▇▇▇▇ may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount.
ATTORNEYS' FEES; EXPENSES. ▇▇▇▇▇▇ may hire an attorney to help collect this Note
if Borrower does not pay, and Borrower will pay ▇▇▇▇▇▇'s reasonable attorneys'
fees. Borrower also will pay Lender all other amounts Lender actually incurs as
court costs, lawful fees for filing, recording, releasing to any public office
any instrument securing this Note; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor vehicle
offered as security for this Note, or premiums or identifiable charges received
in connection with the sale of authorized insurance.
GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF TEXAS. THIS NOTE HAS
BEEN ACCEPTED BY ▇▇▇▇▇▇ IN THE STATE OF TEXAS.
CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced by this
Note occurred in BEXAR County, ▇▇▇▇▇▇▇▇ agrees upon ▇▇▇▇▇▇'s request to submit
to the jurisdiction of the courts of BEXAR County, State of Texas.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes ▇▇▇▇▇▇, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from ▇▇▇▇▇▇▇▇'s accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
▇▇▇▇▇▇▇▇ agrees to be liable for all sums either: (A) advanced in accordance
with the instructions of an authorized person or (B) credited to any of
▇▇▇▇▇▇▇▇'s accounts with ▇▇▇▇▇▇. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by ▇▇▇▇▇▇'s
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (A) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (B) Borrower or any guarantor ceases doing business or is
insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (D) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (E) Lender in good faith
believes itself insecure. This revolving line of credit shall not be subject to
Ch. 346 of the Texas Finance Code.
OTHER CREDITS AFFECTING AVAILABILITY. Any other credits made available to
Borrower by ▇▇▇▇▇▇, such as other loans or letters of credit, may be advanced to
Borrower and/or issued under this line of credit commitment, and any such
advances or issuances shall, in addition to the outstanding advances on this
Note, reduce the outstanding availability on the Line of Credit.
DISHONORED CHECK CHARGE. In the event a check offered in full or partial payment
on this loan is returned unpaid, ▇▇▇▇▇▇ may charge a fee for the purpose of
defraying the expense incident, to handling such returned check, and ▇▇▇▇▇▇▇▇
agrees to pay such fee. The fee shall not exceed the maximum amount permitted
under applicable law.
FINANCIAL INFORMATION. ▇▇▇▇▇▇▇▇ agrees to promptly furnish and cause any other
person who signs, guarantees or endorses this Note or any other document
executed in connection with this Note, to furnish such financial information and
statements, including financial statements in a format acceptable to Lender,
lists of assets and liabilities, agings of receivables and payable, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's or such person's financial condition and business operations as
▇▇▇▇▇▇ may request from time to time. This provision shall not after the
obligation to deliver to Lender any other financial statements or reports
pursuant to the terms of any other loan documents executed in connection with
this Note.
INSURANCE. ▇▇▇▇▇▇▇▇ agrees to maintain insurance of such types, including public
liability insurance, and in such amounts as are satisfactory to Lender and to
furnish Lender upon request with a detailed list, in form and substance
satisfactory to Lender, of all insurance then in effect.
FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document 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 fax 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. Upon request of ▇▇▇▇▇▇, any faxed document shall be
re-executed by each signatory party in an original form.
WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.
PROMISSORY NOTE
(CONTINUED) PAGE 3
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon ▇▇▇▇▇▇▇▇, and
upon ▇▇▇▇▇▇▇▇'s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
▇▇▇▇▇▇ does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Texas
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. The right to accelerate maturity of sums due under this Note does
not include the right to accelerate any interest which has not otherwise accrued
on the date of such acceleration, and Lender does not intend to charge or
collect any unearned interest in the event of acceleration. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the loan evidenced by
this Note until payment in full so that the rate or amount of interest on
account of the loan evidenced hereby does not exceed the applicable usury
ceiling. Lender may delay or forgo enforcing any of its rights or remedies under
this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, notice of dishonor, notice of intent to
accelerate the maturity of this Note, and notice of acceleration of the maturity
of this Note. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect ▇▇▇▇▇▇'s security interest in the
collateral without the consent of or notice to anyone. All such parties also
agree that ▇▇▇▇▇▇ may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, ▇▇▇▇▇▇▇▇ READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. ▇▇▇▇▇▇▇▇ AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
DESIGN TRENDS, LLC
CRAFTMADE INTERNATIONAL, INC., MANAGER OF DESIGN TRENDS, LLC
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT OF CRAFTMADE
INTERNATIONAL, INC.
[LOGO]
COMMERCIAL SECURITY AGREEMENT
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
$2,000,000.00 06-14-2004 10-31-2005 9001 3560802 146
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
GRANTOR: DESIGN TRENDS, LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO, TX 78296
THIS COMMERCIAL SECURITY AGREEMENT DATED JUNE 14, 2004, IS MADE AND EXECUTED
BETWEEN DESIGN TRENDS, LLC ("GRANTOR") AND THE FROST NATIONAL BANK ("LENDER").
GRANT OF SECURITY INTEREST. FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER
A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT
LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE
COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:
ALL INVENTORY AND ACCOUNTS
In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described herein,
whether added now or later.
(B) All products and produce of any of the property described in this
Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, consignment
or other disposition of any of the property described in this Collateral
section.
(D) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section, and sums due from a third party who has
damaged or destroyed the Collateral or from that party's insurer, whether
due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to
utilize, create, maintain, and process any such records or data on
electronic media.
Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Collateral unless and until
such a notice is given.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes ▇▇▇▇▇▇, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
▇▇▇▇▇▇▇'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:
PERFECTION OF SECURITY INTEREST. ▇▇▇▇▇▇▇ agrees to execute financing
statements and to take whatever other actions are requested by ▇▇▇▇▇▇ to
perfect and continue ▇▇▇▇▇▇'s security interest in the Collateral. Upon
request of ▇▇▇▇▇▇, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
▇▇▇▇▇▇'s interest upon any and all chattel paper if not delivered to
Lender for possession by ▇▇▇▇▇▇. This is a continuing Security Agreement
and will continue in effect even though all or any part of the
Indebtedness is paid in full and even though for a period of time Grantor
may not be indebted to Lender.
NOTICES TO LENDER. Grantor will promptly notify Lender in writing at
▇▇▇▇▇▇'s address shown above (or such other addresses as Lender may
designate from time to time) prior to any (1) change in Grantor's name;
(2) change in Grantor's assumed business name(s); (3) change in the
management or in the members or managers of the limited liability company
Grantor; (4) change in the authorized signer(s); (5) change in Grantor's
principal office address; (6) change in Grantor's state of organization;
(7) conversion of Grantor to a new or different type of business entity;
or (8) change in any other aspect of Grantor that directly or indirectly
relates to any agreements between Grantor and Lender. No change in
Grantor's name or state of organization will take effect until after
▇▇▇▇▇▇ has received notice.
COMMERCIAL SECURITY AGREEMENT
(CONTINUED) PAGE 2
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its membership agreement does not prohibit any term or
condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the Uniform
Commercial Code, the Collateral is enforceable in accordance with its
terms, is genuine, and fully complies with all applicable laws and
regulations concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral. At the time any Account becomes subject to
a security interest in favor of ▇▇▇▇▇▇, the Account shall be a good and
valid account representing an undisputed, bona fide indebtedness incurred
by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of
sale, or for services previously performed by Grantor with or for the
account debtor. So long as this Agreement remains in effect, Grantor shall
not, without ▇▇▇▇▇▇'s prior written consent, compromise, settle, adjust,
or extend payment under or with regard to any such Accounts. There shall
be no setoffs or counterclaims against any of the Collateral, and no
agreement shall have been made under which any deductions or discounts may
be claimed concerning the Collateral except those disclosed to Lender in
writing.
LOCATION OF THE COLLATERAL. Except in the ordinary course of ▇▇▇▇▇▇▇'s
business, ▇▇▇▇▇▇▇ agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor's address
shown above or at such other locations as are acceptable to Lender. Upon
Lender's request, Grantor will deliver to Lender in form satisfactory to
Lender a schedule of real properties and Collateral locations relating to
Grantor's operations, including without limitation the following: (1) all
real property Grantor owns or is purchasing; (2) all real property Grantor
is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may
be located.
REMOVAL OF THE COLLATERAL. Except in the ordinary course of ▇▇▇▇▇▇▇'s
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing location without Lender's prior written
consent. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the
State of Delaware, without ▇▇▇▇▇▇'s prior written consent. Grantor shall,
whenever requested, advise Lender of the exact location of the Collateral.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, or as otherwise
provided for in this Agreement, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. While Grantor is not in
default under this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as a buyer
in the ordinary course of business. A sale in the ordinary course of
▇▇▇▇▇▇▇'s business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any
lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent
of Lender. This includes security interests even if junior in right to the
security interests granted under this Agreement. Unless waived by ▇▇▇▇▇▇,
all proceeds from any disposition of the Collateral (for whatever reason)
shall be held in trust for Lender and shall not be commingled with any
other funds; provided however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that Grantor holds good
and marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend ▇▇▇▇▇▇'s
rights in the Collateral against the claims and demands of all other
persons.
REPAIRS AND MAINTENANCE. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and
condition at all times while this Agreement remains in effect. ▇▇▇▇▇▇▇
further agrees to pay when due all claims for work done on, or services
rendered or material furnished in connection with the Collateral so that
no lien or encumbrance may ever attach to or be filed against the
Collateral.
INSPECTION OF COLLATERAL. Lender and ▇▇▇▇▇▇'s designated representatives
and agents shall have the right at all reasonable times to examine and
inspect the Collateral wherever located.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as ▇▇▇▇▇▇'s interest in the Collateral is not jeopardized in
▇▇▇▇▇▇'s sole opinion. In any contest Grantor shall defend itself and
▇▇▇▇▇▇ and shall satisfy any final adverse judgment before enforcement
against the Collateral. Grantor shall name ▇▇▇▇▇▇ as an additional obligee
under any surety bond furnished in the contest proceedings. ▇▇▇▇▇▇▇
further agrees to furnish Lender with evidence that such taxes,
assessments, and governmental and other charges have been paid in full and
in a timely manner. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as ▇▇▇▇▇▇'s
interest in the Collateral is not jeopardized.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral, including all laws or
regulations relating to the undue erosion of highly-erodible land or
relating to the conversion of wetlands for the production of an
agricultural product or commodity. Grantor may contest in good faith any
such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as ▇▇▇▇▇▇'s interest in
the Collateral, in ▇▇▇▇▇▇'s opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used in violation of any Environmental Laws or for the
generation, manufacture, storage, transportation, treatment, disposal,
release or threatened release of any Hazardous Substance. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for Hazardous Substances.
Grantor hereby (1) releases and waives any future claims against ▇▇▇▇▇▇
for indemnity or contribution in the event Grantor becomes liable for
cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness and
the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis
reasonably acceptable to Lender and issued by a company or companies
reasonably acceptable to Lender. Grantor, upon request of ▇▇▇▇▇▇, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least ten (10)
days' prior written notice to Lender and not including any disclaimer of
the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that
COMMERCIAL SECURITY AGREEMENT
(CONTINUED) PAGE 3
coverage in favor of ▇▇▇▇▇▇ will not be impaired in any way by any act,
omission or default of Grantor or any other person. In connection with all
policies covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or other
endorsements as Lender may require. If Grantor at any time fails to obtain
or maintain any insurance as required under this Agreement, Lender may
(but shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if Lender so chooses "single interest insurance,"
which will cover only ▇▇▇▇▇▇'s interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to
be sufficient to produce, at least fifteen (15) days before the premium
due date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and ▇▇▇▇▇▇ is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of ▇▇▇▇▇▇, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following; (1)
the name of the insurer; (2) the risks insured; (3) the amount of the
policy; (4) the property insured; (5) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (6) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have
an independent appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.
FINANCING STATEMENTS. Grantor authorizes Lender to file a UCC-1 financing
statement, or alternatively, a copy of this Agreement to perfect ▇▇▇▇▇▇'s
security interest. At ▇▇▇▇▇▇'s request, ▇▇▇▇▇▇▇ additionally agrees to
sign all other documents that are necessary to perfect, protect, and
continue ▇▇▇▇▇▇'s security interest in the Property. Grantor will pay all
filing fees, title transfer fees, and other fees and costs involved unless
prohibited by law or unless Lender is required by law to pay such fees and
costs. Grantor irrevocably appoints ▇▇▇▇▇▇ to execute financing statements
and documents of title in ▇▇▇▇▇▇▇'s name and to execute all documents
necessary to transfer title if there is a default. Lender may file a copy
of this Agreement as a financing statement. If Grantor changes Grantor's
name or address, or the name or address of any person granting a security
interest under this Agreement changes, Grantor will promptly notify the
Lender of such change.
▇▇▇▇▇▇▇'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by ▇▇▇▇▇▇, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
In ▇▇▇▇▇▇'s sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
▇▇▇▇▇▇'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect ▇▇▇▇▇▇'s interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures paid by Lender for such purposes will then bear interest at the
Note rate from the date paid by Lender to the date of repayment by Grantor. All
such expenses will become a part of the Indebtedness and, at Lender's option,
will (A) be payable on demand; (B) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C) be treated as a balloon payment which will be
due and payable at the Note's maturity. The Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which ▇▇▇▇▇▇ may be entitled upon Default.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
PAYMENT DEFAULT. Grantor fails to make any payment when due under the
Indebtedness.
OTHER DEFAULTS. Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of
the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Grantor.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Grantor's property or Grantor's
or any Grantor's ability to repay the Indebtedness or perform their
respective obligations under this Agreement or any of the Related
Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Grantor or on Grantor's behalf under this Agreement
or the Related Documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
COMMERCIAL SECURITY AGREEMENT
(CONTINUED) PAGE 4
collateral document to create a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution of Grantor (regardless of whether election to
continue is made), any member withdraws from the limited liability
company, or any other termination of Grantor's existence as a going
business or the death of any member, the insolvency of Grantor, the
appointment of a receiver for any part of Grantor's property, any
assignment for the benefit of creditors, any type of creditor workout, or
the commencement of any proceeding under any bankruptcy or insolvency laws
by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against any collateral securing the Indebtedness. This
includes a garnishment of any of Grantor's accounts, including deposit
accounts, with ▇▇▇▇▇▇. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives ▇▇▇▇▇▇ written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to Guarantor of any of the Indebtedness or Guarantor dies or
becomes incompetent or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or ▇▇▇▇▇▇ believes the prospect of payment or performance of
the Indebtedness is impaired.
INSECURITY. Lender in good faith believes itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Delaware Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. ▇▇▇▇▇▇ may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice of any kind to Grantor.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. ▇▇▇▇▇▇ also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that ▇▇▇▇▇▇ makes reasonable efforts to return them to Grantor
after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
▇▇▇▇▇▇'s own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor, and other persons as required by law, reasonable
notice of the time and place of any public sale, or the time after which
any private sale or any other disposition of the Collateral is to be made.
However, no notice need be provided to any person who, after Event of
Default occurs, enters into and authenticates an agreement waiving that
person's right to notification of sale. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days before
the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses
of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
APPOINT RECEIVER. Lender shall have the right to have a receiver appointed
to take possession of all or any part of the Collateral, with the power to
protect and preserve the Collateral, to operate the Collateral preceding
foreclosure or sale, and to collect the Rents from the Collateral and
apply the proceeds, over and above the cost of the receivership, against
the Indebtedness. The receiver may serve without bond if permitted by law.
▇▇▇▇▇▇'s right to the appointment of a receiver shall exist whether or not
the apparent value of the Collateral exceeds the Indebtedness by a
substantial amount. Employment by ▇▇▇▇▇▇ shall not disqualify a person
from serving as a receiver.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in ▇▇▇▇▇▇'s discretion transfer any
Collateral into ▇▇▇▇▇▇'s own name or that of ▇▇▇▇▇▇'s nominee and receive
the payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether
or not Indebtedness or Collateral is then due. For these purposes, ▇▇▇▇▇▇
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, ▇▇▇▇▇▇ may notify
account debtors and obligors on any Collateral to make payments directly
to Lender.
OBTAIN DEFICIENCY. If ▇▇▇▇▇▇ chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement.
Grantor shall be liable for a deficiency even if the transaction described
in this subsection is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
ELECTION OF REMEDIES. Except as may be prohibited by applicable law, all
of Lender's rights and remedies, whether evidenced by this Agreement, the
Related Documents, or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by ▇▇▇▇▇▇ to pursue any
remedy shall not exclude pursuit of any other remedy, and an election to
make expenditures or to take action to perform an obligation of Grantor
under this Agreement, after ▇▇▇▇▇▇▇'s failure to perform, shall not affect
▇▇▇▇▇▇'s right to declare a default and exercise its remedies.
WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.
FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document is transmitted by
COMMERCIAL SECURITY AGREEMENT
(CONTINUED) PAGE 5
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 fax 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.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES; EXPENSES. ▇▇▇▇▇▇▇ agrees to pay upon demand all of
▇▇▇▇▇▇'s costs and expenses, including ▇▇▇▇▇▇'s ▇▇▇▇▇▇'s reasonable
attorneys' fees and ▇▇▇▇▇▇'s legal expenses, incurred in connection with
the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and expenses
of such enforcement. Costs and expenses include ▇▇▇▇▇▇'s Lender's
reasonable attorneys' fees and legal expenses whether or not there is a
lawsuit, including ▇▇▇▇▇▇'s reasonable attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Grantor also shall pay all court costs and such
additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED
IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF TEXAS, EXCEPT
AND ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND
ENFORCEMENT OF ▇▇▇▇▇▇'S RIGHTS AND REMEDIES AGAINST THE COLLATERAL WHICH
MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. HOWEVER,
IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS
AGREEMENT IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY
WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE
SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS
EVIDENCED BY THE NOTE AND THIS AGREEMENT HAS BEEN APPLIED FOR, CONSIDERED,
APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY
LENDER IN THE STATE OF TEXAS.
CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
by this Agreement occurred in BEXAR County, ▇▇▇▇▇▇▇ agrees upon ▇▇▇▇▇▇'s
request to submit to the jurisdiction of the courts of BEXAR County, State
of Texas.
NO WAIVER BY ▇▇▇▇▇▇. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
▇▇▇▇▇▇. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
▇▇▇▇▇▇ of a provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
▇▇▇▇▇▇, nor any course of dealing between ▇▇▇▇▇▇ and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
NOTICES. Any notice required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its
address for notices under this Agreement by giving formal written notice
to the other parties, specifying that the purpose of the notice is to
change the party's address. For notice purposes, ▇▇▇▇▇▇▇ agrees to keep
▇▇▇▇▇▇ informed at all times of ▇▇▇▇▇▇▇'s current address. Unless
otherwise provided or required by law, if there is more than one Grantor,
any notice given by Lender to any Grantor is deemed to be notice given to
all Grantors.
POWER OF ATTORNEY. Grantor hereby appoints ▇▇▇▇▇▇ as ▇▇▇▇▇▇▇'s irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this
Agreement or to demand termination of filings of other secured parties.
Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of ▇▇▇▇▇▇'s security interest in the
Collateral.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified,
it shall be considered deleted from this Agreement. Unless otherwise
required by law, the illegality, invalidity, or unenforceability of any
provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this
Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors and
assigns. If ownership of the Collateral becomes vested in a person other
than Grantor, Lender, without notice to Grantor, may deal with Grantor's
successors with reference to this Agreement and the Indebtedness by way of
forbearance or extension without releasing Grantor from the obligations of
this Agreement or liability under the Indebtedness.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, and agreements made by Grantor in this Agreement shall survive
the execution and delivery of this Agreement, shall be continuing in
nature, and shall remain in full force and effect until such time as
Grantor's Indebtedness shall be paid in full.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:
ACCOUNT. The word "Account" means a trade account, account receivable,
other receivable, or other right to payment for goods sold or services
rendered owing to Grantor (or to a third party grantor acceptable to
Lender).
AGREEMENT. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
COMMERCIAL SECURITY AGREEMENT
(CONTINUED) PAGE 6
BORROWER. The word "Borrower" means Design Trends, LLC and includes all
co-signers and co-makers signing the Note.
COLLATERAL. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral as described in the Collateral
Description section of this Agreement.
DEFAULT. The word "Default" means the Default set forth in this Agreement
in the section titled "Default".
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub.
L. No. 99-499 ("▇▇▇▇"), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901, et seq., or other applicable state or federal
laws, rules, or regulations adopted pursuant thereto.
EVENT OF DEFAULT. The words "Event of Default" mean any of the events of
default set forth in this Agreement in the default section of this
Agreement.
GRANTOR. The word "Grantor" means Design Trends, LLC.
GUARANTOR. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the indebtedness.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used, treated,
stored, disposed of, generated, manufactured, transported or otherwise
handled. The words "Hazardous Substances" are used in their very broadest
sense and include without limitation any and all hazardous or toxic
substances, materials or waste as defined by or listed under the
Environmental Laws. The term "Hazardous Substances" also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof
and asbestos.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
Grantor is responsible under this Agreement or under any of the Related
Documents. Specifically, without limitation, Indebtedness includes all
amounts that may be indirectly secured by the Cross-Collateralization
provision of this Agreement.
LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors
and assigns.
NOTE. The word "Note" means the Note executed by Design Trends, LLC in the
principal amount of $2,000,000.00 dated June 14, 2004. together with all
renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
PROPERTY. The word "Property" means all of Grantor's right, title and
interest in and to all the Property as described in the "Collateral
Description" section of this Agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 14, 2004.
THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.
GRANTOR:
DESIGN TRENDS, LLC
CRAFTMADE INTERNATIONAL, INC., MANAGER OF DESIGN TRENDS, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT OF CRAFTMADE
INTERNATIONAL, INC.
[LOGO]
COMMERCIAL GUARANTY
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
146
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or Item.
Any item above containing "***" has been omitted due to text length limitations.
BORROWER: DESIGN TRENDS, LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO, TX 78296
GUARANTOR: ▇▇▇▇▇ NORTHWEST, LLC (TIN: ▇▇-▇▇▇▇▇▇▇)
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
AMOUNT OF GUARANTY. THE PRINCIPAL AMOUNT OF THIS GUARANTY IS 50.000% OF ALL
AMOUNTS DUE FROM BORROWER TO LENDER AS PROVIDED BELOW, HOWEVER IN NO EVENT TO
EXCEED ONE MILLION & 00/100 DOLLARS ($1,000,000.00).
GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, ▇▇▇▇▇ NORTHWEST, LLC
("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO
THE FROST NATIONAL BANK ("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED
STATES OF AMERICA, 50.000% OF THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW)
OF DESIGN TRENDS, LLC ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET
FORTH IN THIS GUARANTY. GUARANTOR AGREES THAT LENDER, IN ITS SOLE DISCRETION,
MAY DETERMINE WHICH PORTION OF BORROWER'S INDEBTEDNESS TO LENDER IS COVERED BY
GUARANTOR'S PERCENTAGE GUARANTY.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $1,000,000.00,
plus all interest thereon, plus all of Lender's costs, expenses, and ▇▇▇▇▇▇'s
reasonable attorneys' fees incurred in connection with or relating to (A) the
collection of the Indebtedness, (B) the collection and sale of any collateral
for the Indebtedness or this Guaranty, or (C) the enforcement of this Guaranty.
Attorneys' fees include, without limitation, ▇▇▇▇▇▇'s reasonable attorneys' fees
whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs
for trial and appeals.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, Lender's rights under all guaranties shall
be cumulative. This Guaranty shall not (unless specifically provided below to
the contrary) affect or invalidate any such other guaranties. Guarantor's
liability will be Guarantor's aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.
INDEBTEDNESS GUARANTEED. The Indebtedness guaranteed by this Guaranty includes
the Note, including (a) all principal, (b) all interest, (c) all late charges,
(d) all loan fees and loan charges, and (e) all collection costs and expenses
relating to the Note or to any collateral for the Note. Collection costs and
expenses include without limitation all of ▇▇▇▇▇▇'s Lender's reasonable
attorneys' fees.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all of Guarantor's other
obligations under this Guaranty shall have been performed in full. Release of
any other guarantor or termination of any other guaranty of the Indebtedness
shall not affect the liability of Guarantor under this Guaranty. A revocation
Lender receives from any one or more Guarantors shall not affect the liability
of any remaining Guarantors under this Guaranty. THIS GUARANTY COVERS A
REVOLVING LINE OF CREDIT AND IT IS SPECIFICALLY ANTICIPATED THAT FLUCTUATIONS
WILL OCCUR IN THE AGGREGATE AMOUNT OF INDEBTEDNESS OWING FROM BORROWER TO
LENDER. GUARANTOR SPECIFICALLY ACKNOWLEDGES AND AGREES THAT FLUCTUATIONS IN THE
AMOUNT OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($ 0.00), SHALL NOT CONSTITUTE A
TERMINATION OF THIS GUARANTY. GUARANTOR'S LIABILITY UNDER THIS GUARANTY SHALL
TERMINATE ONLY UPON (A) TERMINATION IN WRITING BY ▇▇▇▇▇▇▇▇ AND LENDER OF THE
LINE OF CREDIT, (B) PAYMENT OF THE INDEBTEDNESS IN FULL IN LEGAL TENDER, AND (C)
PAYMENT IN FULL IN LEGAL TENDER OF ALL OF GUARANTOR'S OTHER OBLIGATIONS UNDER
THIS GUARANTY.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, WITHOUT NOTICE
OR DEMAND AND WITHOUT LESSENING OR OTHERWISE AFFECTING GUARANTOR'S LIABILITY
UNDER THIS GUARANTY, FROM TIME TO TIME: (A) to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments and credits shall be made on the Indebtedness (F) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(B) this Guaranty is executed at Borrower's request and not at the request of
Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (E) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor's financial condition, as of
the dates the financial
COMMERCIAL GUARANTY
(CONTINUED) PAGE 2
information is provided; (G) no material adverse change has occurred in
Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (H) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (J)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
▇▇▇▇▇▇ shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (A) to continue lending money or to extend other
credit to Borrower; (B) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (C) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor, (D) to proceed directly against or exhaust any collateral held by
▇▇▇▇▇▇ from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by ▇▇▇▇▇▇ from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (F) to pursue any other
remedy within Lender's power; or (G) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
In addition to the waivers set forth herein, if now or hereafter Borrower is or
shall become insolvent and the Indebtedness shall not at all times until paid be
fully secured by collateral pledged by ▇▇▇▇▇▇▇▇, Guarantor hereby forever waives
and gives up in favor of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇'s and ▇▇▇▇▇▇▇▇'s
respective successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall Guarantor be or become a "creditor" of Borrower within the
meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal
bankruptcy laws.
Guarantor waives all rights of Guarantor under Chapter 34 of the Texas Business
and Commerce Code. Guarantor also waives any and all rights or defenses arising
by reason of (A) any "one action" or "anti-deficiency" law or any other law
which may prevent Lender from bringing any action, including a claim for
deficiency, against Guarantor, before or after ▇▇▇▇▇▇'s commencement or
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (B) any election of remedies by Lender which destroys or
otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights
to proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (C) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by reason of the
cessation of Borrower's liability from any cause whatsoever, other than payment
in full in legal tender, of the Indebtedness; (D) any right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral for
the Indebtedness; (E) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced, there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable statute
of limitations; or (F) any defenses given to guarantors at law or in equity
other than actual payment and performance of the Indebtedness. If payment is
made by ▇▇▇▇▇▇▇▇, whether voluntarily or otherwise, or by any third party, on
the Indebtedness and thereafter ▇▇▇▇▇▇ is forced to remit the amount of that
payment to ▇▇▇▇▇▇▇▇'s trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of the enforcement of
this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
SUBORDINATION OF ▇▇▇▇▇▇▇▇'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be superior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both ▇▇▇▇▇▇ and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
▇▇▇▇▇▇▇▇▇ agrees, and ▇▇▇▇▇▇ is hereby authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Guaranty. No alteration of or amendment to
this Guaranty shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
▇▇▇▇▇▇'s costs and expenses, including ▇▇▇▇▇▇'s reasonable attorneys' fees
and ▇▇▇▇▇▇'s legal expenses, incurred in connection with the enforcement
of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such
enforcement. Costs and expenses include ▇▇▇▇▇▇'s reasonable attorneys'
fees and legal expenses whether or not there is a lawsuit, including
▇▇▇▇▇▇'s reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Guaranty are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Guaranty.
GOVERNING LAW. This Guaranty will be governed by, construed and enforced
in accordance with federal law and the laws of the State of Texas. This
Guaranty has been accepted by ▇▇▇▇▇▇ in the State of Texas.
COMMERCIAL GUARANTY
(CONTINUED) PAGE 3
CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
by this Guaranty occurred in BEXAR County, Guarantor agrees upon ▇▇▇▇▇▇'s
request to submit to the jurisdiction of the courts of BEXAR County, State
of Texas.
INTEGRATION. ▇▇▇▇▇▇▇▇▇ further agrees that Guarantor has read and fully
understands the terms of this Guaranty; Guarantor has had the opportunity
to be advised by Guarantor's attorney with respect to this Guaranty; the
Guaranty fully reflects Guarantor's intentions and parol evidence is not
required to interpret the terms of this Guaranty. Guarantor hereby
indemnifies and holds Lender harmless from all losses, claims, damages,
and costs (including ▇▇▇▇▇▇'s attorneys' fees) suffered or incurred by
▇▇▇▇▇▇ as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one
or more of them. The words "Guarantor," "Borrower," and "Lender" include
the heirs, successors, assigns, and transferees of each of them. If a
court finds that any provision of this Guaranty is not valid or should not
be enforced, that fact by itself will not mean that the rest of this
Guaranty will not be valid or enforced. Therefore, a court will enforce
the rest of the provisions of this Guaranty even if a provision of this
Guaranty may be found to be invalid or unenforceable. If any one or more
of Borrower or Guarantor are corporations, partnerships, limited liability
companies, or similar entitles, it is not necessary for Lender to inquire
into the powers of Borrower or Guarantor or of the officers, directors,
partners, managers, or other agents acting or purporting to act on their
behalf, and any Loan indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
NOTICES. Any notice required to be given under this Guaranty shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Guaranty. Any party may change its
address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, ▇▇▇▇▇▇▇▇▇ agrees to keep ▇▇▇▇▇▇
informed at all times of Guarantor's current address. Unless otherwise
provided or required by law, if there is more than one Guarantor, any
notice given by Lender to any Guarantor is deemed to be notice given to
all Guarantors.
NO WAIVER BY ▇▇▇▇▇▇. Lender shall not be deemed to have waived any rights
under this Guaranty unless such waiver is given in writing and signed by
▇▇▇▇▇▇. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
▇▇▇▇▇▇ of a provision of this Guaranty shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
▇▇▇▇▇▇, nor any course of dealing between ▇▇▇▇▇▇ and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Guaranty, the granting of such consent by Lender in
any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty
on transfer of Guarantor's interest, this Guaranty shall be binding upon
and inure to the benefit of the parties, their successors and assigns.
WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.
FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document 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 fax 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.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Guaranty. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Guaranty shall have the meanings
attributed to such terms in the Uniform Commercial Code:
BORROWER. The word "Borrower" means Design Trends, LLC and includes all
co-signers and co-makers signing the Note.
GUARANTOR. The word "Guarantor" means each and every person or entity
signing this Guaranty, including without limitation Craftmade
International, LLC.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
INDEBTEDNESS. The word "Indebtedness" means ▇▇▇▇▇▇▇▇'s indebtedness to
Lender as more particularly described in this Guaranty.
LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors
and assigns.
NOTE. The word "Note" means the promissory note dated June 14, 2004, in
the original principal amount of $2,000,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the promissory
note or agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
COMMERCIAL GUARANTY
(CONTINUED) PAGE 4
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY ▇▇▇▇▇▇ IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 14, 2004.
GUARANTOR;
▇▇▇▇▇ NORTHWEST, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇.▇▇▇▇▇ /s/ ▇▇▇ ▇▇▇▇▇
----------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, MEMBER OF ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ Managing Member of
NORTHWEST, LLC ▇▇▇▇▇ NORTHWEST LLC
[LOGO]
COMMERCIAL GUARANTY
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
146
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item. Any item
above containing " * * * " has been omitted due to text length limitations.
BORROWER: DESIGN TRENDS, LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO, TX 78296
GUARANTOR: CRAFTMADE INTERNATIONAL, INC. (TIN: ▇▇-▇▇▇▇▇▇▇)
P.O. BOX 1037
COPPELL, TX 75019
AMOUNT OF GUARANTY. THE PRINCIPAL AMOUNT OF THIS GUARANTY IS 50,000% OF ALL
AMOUNTS DUE FROM BORROWER TO LENDER AS PROVIDED BELOW, HOWEVER IN NO EVENT TO
EXCEED ONE MILLION & 00/100 DOLLARS ($1,000,000.00).
GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, CRAFTMADE INTERNATIONAL,INC.
("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO
THE FROST NATIONAL BANK ("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED
STATES OF AMERICA, 50,000% OF THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW)
OF DESIGN TRENDS, LLC ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET
FORTH IN THIS GUARANTY. GUARANTOR AGREES THAT LENDER, IN ITS SOLE DISCRETION,
MAY DETERMINE WHICH PORTION OF BORROWER'S INDEBTEDNESS TO LENDER IS COVERED BY
GUARANTOR'S PERCENTAGE GUARANTY.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $1,000,000.00,
plus all interest thereon, plus all of Lender's costs, expenses, and ▇▇▇▇▇▇'s
reasonable attorneys' fees incurred in connection with or relating to (A) the
collection of the Indebtedness, (B) the collection and sale of any collateral
for the Indebtedness or this Guaranty, or (C) the enforcement of this Guaranty.
Attorneys' fees include, without limitation, ▇▇▇▇▇▇'s reasonable attorneys' fees
whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs
for trial and appeals.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, Lender's rights under all guaranties shall
be cumulative. This Guaranty shall not (unless specifically provided below to
the contrary) affect or invalidate any such other guaranties. Guarantor's
liability will be Guarantor's aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.
INDEBTEDNESS GUARANTEED. The Indebtedness guaranteed by this Guaranty includes
the Note, including (a) all principal, (b) all interest, (c) all late charges.
(d) all loan fees and loan charges, and (e) all collection costs and expenses
relating to the Note or to any collateral for the Note. Collection costs and
expenses include without limitation all of ▇▇▇▇▇▇'s Lender's reasonable
attorneys' fees.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all of Guarantor's other
obligations under this Guaranty shall have been performed in full. Release of
any other guarantor or termination of any other guaranty of the Indebtedness
shall not affect the liability of Guarantor under this Guaranty. A revocation
Lender receives from any one or more Guarantors shall not affect the liability
of any remaining Guarantors under this Guaranty. THIS GUARANTY COVERS A
REVOLVING LINE OF CREDIT AND IT IS SPECIFICALLY ANTICIPATED THAT FLUCTUATIONS
WILL OCCUR IN THE AGGREGATE AMOUNT OF INDEBTEDNESS OWING FROM BORROWER TO
LENDER. GUARANTOR SPECIFICALLY ACKNOWLEDGES AND AGREES THAT FLUCTUATIONS IN THE
AMOUNT OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($ 0.00), SHALL NOT CONSTITUTE A
TERMINATION OF THIS GUARANTY. GUARANTOR'S LIABILITY UNDER THIS GUARANTY SHALL
TERMINATE ONLY UPON (A) TERMINATION IN WRITING BY ▇▇▇▇▇▇▇▇ AND LENDER OF THE
LINE OF CREDIT, (B) PAYMENT OF THE INDEBTEDNESS IN FULL IN LEGAL TENDER, AND (C)
PAYMENT IN FULL IN LEGAL TENDER OF ALL OF GUARANTOR'S OTHER OBLIGATIONS UNDER
THIS GUARANTY.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice
or demand and without lessening or otherwise affecting Guarantor's liability
under this Guaranty, from time to time: (A) to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to altar,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments and credits shall be made on the Indebtedness (F) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(B) this Guaranty is executed at Borrower's request and not at the request of
Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (E) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor's financial
condition, as of the dates the financial
COMMERCIAL GUARANTY
(CONTINUED) PAGE 2
information is provided; (G) no material adverse change has occurred in
Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (H) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (J)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
▇▇▇▇▇▇ shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (A) to continue lending money or to extend other
credit to Borrower; (B) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (C) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (D) to proceed directly against or exhaust any collateral held by
▇▇▇▇▇▇ from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by ▇▇▇▇▇▇ from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (F) to pursue any other
remedy within Lender's power; or (G) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
In addition to the waivers set forth herein, if now or hereafter Borrower is or
shall become insolvent and the Indebtedness shell not at all times until paid be
fully secured by collateral pledged by ▇▇▇▇▇▇▇▇, Guarantor hereby forever waives
and gives up in favor of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇'s and ▇▇▇▇▇▇▇▇'s
respective successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall Guarantor be or become a "creditor" of Borrower within the
meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal
bankruptcy laws.
Guarantor waives all rights of Guarantor under Chapter 34 of the Texas Business
and Commerce Code. Guarantor also waives any and all rights or defenses arising
by reason of (A) any "one action" or "anti-deficiency" law or any other law
which may prevent Lender from bringing any action, including a claim for
deficiency, against Guarantor, before or after ▇▇▇▇▇▇'s commencement or
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (B) any election of remedies by Lender which destroys or
otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights
to proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (C) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by reason of the
cessation of Borrower's liability from any cause whatsoever, other than payment
in full in legal tender, of the Indebtedness; (D) any right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral for
the Indebtedness; (E) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced, there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable statute
of limitations; or (F) any defenses given to guarantors at law or in equity
other than actual payment and performance of the Indebtedness. If payment is
made by ▇▇▇▇▇▇▇▇, whether voluntarily or otherwise, or by any third party, on
the Indebtedness and thereafter ▇▇▇▇▇▇ is forced to remit the amount of that
payment to ▇▇▇▇▇▇▇▇'s trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of the enforcement of
this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
SUBORDINATION OF ▇▇▇▇▇▇▇▇'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be superior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both ▇▇▇▇▇▇ and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
▇▇▇▇▇▇▇▇▇ agrees, and ▇▇▇▇▇▇ is hereby authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Guaranty. No alteration of or amendment to
this Guaranty shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
▇▇▇▇▇▇'s costs and expenses, including ▇▇▇▇▇▇'s reasonable attorneys' fees
and ▇▇▇▇▇▇'s legal expenses, incurred in connection with the enforcement
of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such
enforcement. Costs and expenses include ▇▇▇▇▇▇'s reasonable attorneys'
fees and legal expenses whether or not there is a lawsuit, including
▇▇▇▇▇▇'s reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Guaranty are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Guaranty.
GOVERNING LAW. This Guaranty will be governed by, construed and enforced
in accordance with federal law and the laws of the State of Texas. This
Guaranty has been accepted by ▇▇▇▇▇▇ in the State of Texas.
COMMERCIAL GUARANTY
(CONTINUED) PAGE 3
CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
by this Guaranty occurred in BEXAR County, Guarantor agrees upon ▇▇▇▇▇▇'s
request to submit to the jurisdiction of the courts of BEXAR County, State
of Texas.
INTEGRATION. ▇▇▇▇▇▇▇▇▇ further agrees that Guarantor has read and fully
understands the terms of this Guaranty; Guarantor has had the opportunity
to be advised by Guarantor's attorney with respect to this Guaranty; the
Guaranty fully reflects Guarantor's intentions and parol evidence is not
required to interpret the terms of this Guaranty. Guarantor hereby
indemnifies and holds Lender harmless from all losses, claims, damages,
and costs (including ▇▇▇▇▇▇'s attorneys' fees) suffered or incurred by
▇▇▇▇▇▇ as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.
INTERPRETATION. In all cases where there is more than one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one
or more of them. The words "Guarantor," "Borrower," and "Lender" include
the heirs, successors, assigns, and transferees of each of them. If a
court finds that any provision of this Guaranty is not valid or should not
be enforced, that fact by itself will not mean that the rest of this
Guaranty will not be valid or enforced. Therefore, a court will enforce
the rest of the provisions of this Guaranty even if a provision of this
Guaranty may be found to be invalid or unenforceable. If any one or more
of Borrower or Guarantor are corporations, partnerships, limited liability
companies, or similar entitles, it is not necessary for Lender to inquire
into the powers of Borrower or Guarantor or of the officers, directors,
partners, managers, or other agents acting or purporting to act on their
behalf, and any Loan indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
NOTICES. Any notice required to be given under this Guaranty shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Guaranty. Any party may change its
address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, ▇▇▇▇▇▇▇▇▇ agrees to keep ▇▇▇▇▇▇
informed at all times of Guarantor's current address. Unless otherwise
provided or required by law, if there is more than one Guarantor, any
notice given by Lender to any Guarantor is deemed to be notice given to
all Guarantors.
NO WAIVER BY ▇▇▇▇▇▇. Lender shall not be deemed to have waived any rights
under this Guaranty unless such waiver is given in writing and signed by
▇▇▇▇▇▇. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
▇▇▇▇▇▇ of a provision of this Guaranty shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty. No prior waiver by
▇▇▇▇▇▇, nor any course of dealing between ▇▇▇▇▇▇ and Guarantor, shall
constitute a waiver of any of Lender's rights or of any of Guarantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Guaranty, the granting of such consent by Lender in
any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty
on transfer of Guarantor's interest, this Guaranty shall be binding upon
and inure to the benefit of the parties, their successors and assigns.
WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.
FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document 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 fax machine
shall be considered for all purposes as an original signature. Any such taxed
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.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Guaranty. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Guaranty shall have the meanings
attributed to such terms in the Uniform Commercial Code:
BORROWER. The word "Borrower" means Design Trends, LLC and includes all
co-signers and co-makers signing the Note.
GUARANTOR. The word "Guarantor" means each and every person or entity
signing this Guaranty, including without limitation Craftmade
International, Inc..
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
INDEBTEDNESS. The word "Indebtedness" means ▇▇▇▇▇▇▇▇'s indebtedness to
Lender as more particularly described in this Guaranty.
LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors
and assigns.
NOTE. The word "Note" means the promissory note dated June 14, 2004, in
the original principal amount of $2,000,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the promissory
note or agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
COMMERCIAL GUARANTY
(CONTINUED) PAGE 4
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY ▇▇▇▇▇▇ IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 14, 2004.
GUARANTOR:
CRAFTMADE INTERNATIONAL, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT OF CRAFTMADE
INTERNATIONAL, INC.
[LOGO]
NOTICE OF FINAL AGREEMENT
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
$2,000,000.00 06-14-2004 10-31-2005 9001 3560802 146
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
BORROWER: DESIGN TRENDS, LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO, TX 78296
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
AS USED IN THIS NOTICE, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:
LOAN. The term "Loan" means the following described loan: a
non-precomputed Variable Rate Nondisclosable Revolving Line of
Credit Loan to a Limited Liability Company for $2,000,000.00 due on
October 31, 2005. The reference rate (Lender's prime rate as
established from time to time, currently 4.000%), resulting in an
initial rate of 4.000.
LOAN AGREEMENT. The term "Loan Agreement" means one or more
promises, promissory notes, agreements, undertakings, security
agreements, deeds of trust or other documents, or commitments, or
any combination of those actions or documents, relating to the Loan,
including without limitation the following:
LOAN DOCUMENTS
Corporate Resolution: Craftmade International, Inc. LLC Resolution: ▇▇▇▇▇ NORTHWEST, LLC
LLC Resolution: Design Trends, LLC Resolution of Corporate LLC Member: Craftmade International,
Resolution of Limited Liability Company LLC Member: ▇▇▇▇▇ Inc.
NORTHWEST, LLC Business Loan Agreement (Asset Based)
Promissory Note TX Commercial Guaranty: ▇▇▇▇▇ NORTHWEST, LLC
TX Commercial Guaranty: Craftmade International, Inc. DE Commercial Security Agreement: All Inventory and Accounts;
DE Revised National UCC FS: All Inventory and Accounts; owned by Design Trends, LLC
owned by Design Trends, LLC Arbitration Agreement - ARBITRATION AGREEMENT
Disbursement Request and Authorization Notice of Final Agreement
PARTIES. The term "Parties" means THE FROST NATIONAL BANK and any and all
entities or individuals who are obligated to repay the loan or have pledged
property as security for the Loan, including without limitation the following:
BORROWER: DESIGN TRENDS, LLC
GRANTOR(s): DESIGN TRENDS, LLC
GUARANTOR 1: CRAFTMADE INTERNATIONAL, INC.
GUARANTOR 2: ▇▇▇▇▇ NORTHWEST, LLC
NOTICE OF FINAL AGREEMENT
(CONTINUED) PAGE 2
This Notice of Final Agreement is given by THE FROST NATIONAL BANK pursuant to
Section 26.02 of the Texas Business and Commerce Code. Each Party who signs
below, other than THE FROST NATIONAL BANK, acknowledges, represents, and
warrants to THE FROST NATIONAL BANK that it has received, read and understood
this Notice of Final Agreement. This Notice is dated June 14, 2004.
BORROWER:
DESIGN TRENDS, LLC
CRAFTMADE INTERNATIONAL, INC., MANAGER OF DESIGN TRENDS, LLC
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT OF CRAFTMADE
INTERNATIONAL, INC.
GUARANTOR:
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT OF CRAFTMADE
INTERNATIONAL. INC.
GUARANTOR:
▇▇▇▇▇ NORTHWEST, LLC
By:/s/ ▇▇▇ ▇▇▇▇▇
----------------------------------------
▇▇▇ ▇▇▇▇▇, MANAGER OF ▇▇▇▇▇
NORTHWEST, LLC
LENDER:
THE FROST NATIONAL BANK
/s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
AUTHORIZED SIGNER
ARBITRATION AGREEMENT
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
$2,000,000.00 06-14-2004 10-31-2005 9001 3560802 146
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
BORROWER: DESIGN TRENDS, LLC (TIN: ▇▇-▇▇▇▇▇▇▇) LENDER: THE FROST NATIONAL BANK
P.O. BOX 1037 ▇▇▇▇▇ FINANCIAL CENTER
COPPELL, TX 75019 P.O. BOX 1600
SAN ANTONIO, TX 78296
LOAN AMOUNT: $2,000,000.00
LOAN DATE: JUNE 14, 2004
The undersigned agree that all disputes, claims and controversies between them,
whether individual, joint, or class in nature, arising from the Promissory Note,
Guaranty, or any agreements executed in connection with this loan (including any
renewals, extensions or modifications thereof) from Lender to Borrower or
otherwise, including without limitation contract and tort disputes, shall be
arbitrated pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, upon written request of a party. The party that
requests arbitration has the burden to initiate the arbitration proceedings
pursuant to and by complying with the Commercial Arbitration Rules of the
American Arbitration Association and shall pay all associated administrative and
filing fees. The arbitration shall be conducted in the City of San Antonio,
Bexar County, Texas, and administered by the American Arbitration Association.
All arbitration hearings will be commenced within sixty (60) days of the written
request for arbitration, and if the arbitration hearing is not commenced within
the sixty (60) days, the party that requested arbitration shall have waived its
election to arbitrate. No act to take or dispose of any collateral securing the
loan shall constitute a waiver of this arbitration agreement or be prohibited by
this arbitration agreement. This includes, without limitation, obtaining
injunctive relief or a temporary restraining order; invoking a power of sale
under any deed of trust or mortgage; obtaining a writ of attachment or
imposition of a receiver; or exercising any rights relating to personal
property, including taking or disposing of such property with or without
judicial process pursuant to Chapter or Article 9 of the Uniform Commercial
Code. Any disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any collateral
securing the loan, including any claim to rescind, reform, or otherwise modify
any agreement relating to the collateral securing the loan, shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this agreement shall preclude any party from seeking equitable relief
from a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding, and
the commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation, and enforcement of this arbitration agreement
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.
BORROWER:
DESIGN TRENDS, LLC,
CRAFTMADE INTERNATIONAL, INC., MANAGER
BY: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
GUARANTOR:
CRAFTMADE INTERNATIONAL, INC.
BY: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
GUARANTOR:
▇▇▇▇▇ NORTHWEST, LLC
BY: /s/ ▇▇▇ ▇▇▇▇▇
---------------------------------------------
▇▇▇ ▇▇▇▇▇, MANAGER
LENDER:
BY: /s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Authorized Officer.
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE MEMBERS OF
DESIGN TRENDS, LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
The undersigned, constituting all of the members of Design Trends, LLC, a
Delaware limited liability company (the "Company"), do hereby waive notice of
the meeting of the members of the Company and do hereby consent and agree,
pursuant to the provisions of Section 3.14 of the Limited Liability Company
Agreement of the Company, to the adoption of the following resolutions:
APPROVAL OF BORROWING RESOLUTIONS
WHEREAS, the Company proposes to enter into that certain Business Loan
Agreement (the "Loan Agreement"), by and among the Company and The Frost
National Bank, a national banking association (the "Bank") to borrow an original
principal amount of $2 million from Bank, a copy of which is attached hereto as
Exhibit A; now therefore be it
RESOLVED, that the executive officers of the Company (the
"Authorized Persons") are hereby authorized for and on behalf of and as
the act and deed of this Company to borrow money or obtain credit from the
Bank in such amounts, for such times, in such forms (including, but not
limited to, notes, facilities, acceptances, letters of credit and
overdrafts) and upon such terms as may be deemed by such Authorized
Persons to be advisable; to renew and extend from time to time any such
loan or credit arrangement; to execute and deliver to Bank, in such form
as may be required by Bank, notes, loan agreements, drafts, letters of
credit applications and other instruments and documents relating to any
indebtedness owing by this Company to Bank or relating to any other
arrangement whereby Bank extends credit to this Company, whether fixed or
contingent; to mortgage, hypothecate, encumber, pledge, assign or transfer
to Bank, or otherwise subject to any lien or security interest in favor of
Bank, as security for any such indebtedness, any property of this Company,
real or personal, tangible or intangible; to sell to Bank with or without
recourse, any of this Company's notes, bills receivable, acceptances or
other paper, whether or not negotiable; and to take all such other actions
as such Authorized Persons may deem to be necessary or desirable, or as
Bank may require, to consummate any transaction contemplated in these
resolutions; and be it
FURTHER RESOLVED, that Bank be and it hereby is authorized to credit
this Company on Bank's books with the proceeds as directed by such
Authorized Persons, whether to the order of any said persons in his
individual capacity or not, and whether such proceeds are deposited to the
individual credit of any such person or not; and be it
FURTHER RESOLVED, that the foregoing authority shall be and continue
in full force and effect until revoked or modified by written notice
actually delivered to the President or a Vice President of Bank; provided
that such revocation shall not be effective with respect to any exercise
of any said authority prior to the receipt by Bank of such notice; and be
it
FURTHER RESOLVED, that any and all lawful actions heretofore taken
by an officer of the Company in his or her capacity as such and in
connection with the matters contemplated in the foregoing resolutions be,
and they hereby are, in all respects approved, adopted, ratified and
confirmed as the act and deed of the Company; and be it
FURTHER RESOLVED, that the Authorized Persons be, and each hereby
is, authorized, for and in the name and on behalf of the Company, to
execute the Loan Agreement in substantially the form submitted to,
reviewed and approved by Craftmade International, Inc., a Delaware
corporation ("Craftmade"), the manager of the Company, with such changes
therein as he, in his sole discretion approves, such approval to be
conclusively evidenced by his execution thereof, and to deliver the Loan
Agreement as so executed to the Bank; and be it
FURTHER RESOLVED, that the Authorized Persons be, and each hereby
is, authorized, for and in the name and on behalf of the Company, to
execute the Promissory Note referenced in the Loan Agreement in
substantially the form submitted to, reviewed and approved by Craftmade,
with such changes therein as he, in his sole discretion approves, such
approval to be conclusively evidenced by his execution thereof, and to
deliver the Promissory Note as so executed to the Bank; and be it
FURTHER RESOLVED, that each Authorized Person be, and hereby is,
authorized, empowered and directed, for and in the name and on behalf of
the Company, to do all such things and acts and to execute and deliver all
such agreements, papers, instruments and documents as may be, in his sole
discretion, deemed necessary or advisable in order to carry out and comply
with all of the terms, covenants, conditions and provisions of the Loan
Agreement as actually executed and delivered and the transactions
contemplated by the Loan Agreement; and be it
FURTHER RESOLVED, that each Authorized Person be, and he hereby is,
authorized, empowered and directed, for and in the name and on behalf of
the Company, to amend the Loan Agreement after its execution as may be, in
his sole discretion, deemed necessary or advisable, such necessity or
advisability to be conclusively evidenced by his execution thereof.
FURTHER ACTIONS
RESOLVED, that the appropriate officers and manager of the Company
be, and they hereby are, authorized and directed to do all other acts,
take all actions and prepare all papers, instruments and documents in
connection therewith which they, in their sole discretion, deem proper in
order to accomplish and carry out the intents and purposes of the
foregoing resolution, and any and all actions previously carried out in
accordance herewith be, and they hereby are, ratified, confirmed, approved
and adopted as the official acts and deeds of the Company.
IN WITNESS WHEREOF, the undersigned members have hereunto set their hand,
in one or more counterparts, as of the 14th day of June 2004.
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇ NORTHWEST, LLC
By: /s/ ▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Manager
EXHIBIT A
BUSINESS LOAN AGREEMENT
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE MEMBERS OF
▇▇▇▇▇ NORTHWEST, LLC
(AN OREGON LIMITED LIABILITY COMPANY)
The undersigned, constituting all of the members of ▇▇▇▇▇ Northwest, LLC,
a Oregon limited liability company (the "Company"), do hereby waive notice of
the meeting of the members of the Company and do hereby consent and agree,
pursuant to the provisions of Section of the Limited Liability Company Agreement
of the Company, to the adoption of the following resolutions:
APPROVAL OF GUARANTY RESOLUTIONS
WHEREAS, the Company owns 50% of the issued, and outstanding membership
interests of Design Trends, LLC, a Delaware limited liability company ("Design
Trends"); and
WHEREAS, the Company proposes to enter into a guaranty of 50% of all
indebtedness of Design Trends to The Frost National Bank, a national banking
association (the "Lender") or $1 million, whichever is less, pursuant to that
certain Business Loan Agreement by and between Design Trends and Lender (the
"Design Trends Loan"), a copy of which is attached hereto as Exhibit A; now
therefore be it
RESOLVED, that pursuant to the Design Trends Loan, this Company
execute and deliver to Lender a guaranty whereby this Company guarantees
payment of 50% of all indebtedness of Design Trends to Lender or $1
million, whichever is less, and any and all renewals, extensions,
rearrangements and substitutions therefor, and be it
FURTHER RESOLVED, that the form and content of the guaranty is
substantially the same as the form attached hereto as Exhibit A, and that
said form was submitted at this meeting and the same is hereby approved;
and be it
FURTHER RESOLVED, that the execution and delivery of said guaranty
to Lender, will benefit, directly or indirectly, this Company; and be it
FURTHER RESOLVED, that the executive officers of the Company (the
"Authorized Persons") be and each of them hereby severally is authorized
and directed for and on behalf of and as the act and deed of this Company
to execute and deliver unto Lender, the guaranty authorized and referred
to in these resolutions, and to take such other action in the consummation
of the transaction herein contemplated as he or she shall deem necessary
or desirable, and any and all actions heretofore or hereafter taken by
such officer(s) of this Company to
such end are hereby expressly ratified and confirmed as the act and deeds
of this Company; and be it
FURTHER RESOLVED, that the foregoing authority shall be and continue
in full force and effect until revoked or modified by written notice
actually delivered to the President or a Vice President of Lender;
provided that such revocation shall not be effective with respect to any
exercise of any said authority prior to the receipt by ▇▇▇▇▇▇ of such
notice; and be it
FURTHER RESOLVED, that any and all lawful actions heretofore taken
by an officer of the Company in his or her capacity as such and in
connection with the matters contemplated in the foregoing resolutions be,
and they hereby are, in all respects approved, adopted, ratified and
confirmed as the act and deed of the Company.
FURTHER ACTIONS
RESOLVED, that the appropriate officers of the Company be, and they
hereby are, authorized and directed to do all other acts, take all actions
and prepare all papers, instruments and documents in connection therewith
which they, in their sole discretion, deem proper in order to accomplish
and carry out the intents and purposes of the foregoing resolution, and
any and all actions previously carried out in accordance herewith be, and
they hereby are, ratified, confirmed, approved and adopted as the official
acts and deeds of the Company.
* * * * *
IN WITNESS WHEREOF, the undersigned members have hereunto set their hand,
in one or more counterparts, as of the 14th day of June 2004.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT A
GUARANTY