CRAFTMADE INTERNATIONAL INC
REVOLVING PROMISSORY NOTE
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<TYPE>EX-10.2
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<FILENAME>d39815exv10w2.htm
<DESCRIPTION>REVOLVING PROMISSORY NOTE
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.2
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>REVOLVING PROMISSORY NOTE</B></U>
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    <TD align="left" valign="top">$30,000,000.00
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    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">September&nbsp;18, 2006</TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For value received, CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (&#147;<U>Borrower</U>&#148;,
whether one or more) does hereby promise to pay to the order of <B>THE FROST NATIONAL BANK</B>
(&#147;<U>Lender</U>&#148;), at P.O. Box 1600, San Antonio, Texas 78296, or at such other address as Lender
shall from time to time specify in writing, in lawful money of the United States of America, the
sum of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00), or so much thereof as from time to time
may be disbursed by Lender to Borrower under the terms of that certain Second Amended and Restated
Loan Agreement dated of even date herewith between Borrower and Lender (the &#147;<U>Loan
Agreement</U>&#148;), and be outstanding, together with interest from date hereof on the principal
balance outstanding from time to time as hereinafter provided. Interest shall be computed on a per
annum basis of a year of 360&nbsp;days and for the actual number of days elapsed, unless such
calculation would result in a rate greater than the highest rate permitted by applicable law, in
which case interest shall be computed on a per annum basis of a year of 365&nbsp;days or 366&nbsp;days in a
leap year, as the case may be.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U><I>Payment Terms</I></U>. Interest only on amounts outstanding hereunder shall be due and
payable monthly as it accrues, on the first day of each and every calendar month, beginning
September&nbsp;1, 2006, and continuing regularly and monthly thereafter until September&nbsp;1, 2009, when
the entire amount hereof, principal and interest then remaining unpaid, shall be then due and
payable; interest being calculated on the unpaid principal each day principal is outstanding and
all payments made credited to any collection costs and late charges, to the discharge of the
interest accrued and to the reduction of the principal, in such order as Lender shall determine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U><I>Late Charge.</I></U> If a payment is made 10&nbsp;days or more late, Borrower will be charged,
in addition to interest, a delinquency charge of (i)&nbsp;5% of the unpaid portion of the regularly
scheduled payment, or (ii) $250.00, whichever is less. Additionally, upon maturity of this Note,
if the outstanding principal balance (plus all accrued but unpaid interest) is not paid within 10
days of the maturity date, Borrower will be charged a delinquency charge of (i)&nbsp;5% of the sum of
the outstanding principal balance (plus all accrued but unpaid interest), or (ii) $250.00,
whichever is less. Borrower agrees with Lender that the charges set forth herein are reasonable
compensation to Lender for the handling of such late payments.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U><I>Interest Rate</I></U>. Interest on the outstanding and unpaid principal balance hereof
will be computed at a per annum rate as provided in the Loan Agreement.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U><I>Default Rate</I></U>. Matured unpaid principal and interest shall bear interest from date
of maturity until paid at the highest rate permitted by applicable law, or if no such maximum rate
is established by applicable law, at the rate stated above plus five percent (5%) per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U><I>Revolving Line of Credit</I></U>. Under the Loan Agreement, Borrower may request advances
and make payments hereunder from time to time, provided that it is understood and agreed that the
aggregate principal amount outstanding from time to time hereunder shall not at any time exceed
$30,000,000.00. The unpaid balance of this Note shall increase and decrease
with
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">each new advance or payment hereunder, as the case may be. This Note shall not be deemed
terminated or canceled prior to the date of its maturity, although the entire principal balance
hereof may from time to time be paid in full. Borrower may borrow, repay and re-borrow hereunder.
All payments and prepayments of principal or interest on this Note shall be made in lawful money of
the United States of America in immediately available funds, at the address of Lender indicated
above, or such other place as the holder of this Note shall designate in writing to Borrower. If
any payment of principal or interest on this Note shall become due on a day which is not a Business
Day (as hereinafter defined), such payment shall be made on the next succeeding Business Day and
any such extension of time shall be included in computing interest in connection with such payment.
As used herein, the term &#147;<U>Business Day</U>&#148; shall mean any day other than a Saturday, Sunday
or any other day on which national banking associations are authorized to be closed. The books and
records of Lender shall be <I>prima facie </I>evidence of all outstanding principal of and accrued and
unpaid interest on this Note.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U><I>Prepayment</I></U>. Borrower reserves the right to prepay, prior to maturity, all or any
part of the principal of this Note without penalty. Any prepayments shall be applied first to
accrued interest and then to principal. Borrower will provide written notice to the holder of this
Note of any such prepayment of all or any part of the principal at the time thereof. All payments
and prepayments of principal or interest on this Note shall be made in lawful money of the United
States of America in immediately available funds, at the address of Lender indicated above, or such
other place as the holder of this Note shall designate in writing to Borrower. All partial
prepayments of principal shall be applied to the last installments payable in their inverse order
of maturity.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U><I>Default</I></U>. It is expressly provided that upon default in the punctual payment of
this Note or any part hereof, principal or interest, as the same shall become due and payable, or
upon the occurrence of an event of default specified in any of the other Loan Documents (as defined
below), the holder of this Note may, at its option, without further notice or demand, (i)&nbsp;declare
the outstanding principal balance of and accrued but unpaid interest on this Note at once due and
payable, (ii)&nbsp;refuse to advance any additional amounts under this Note, (iii)&nbsp;foreclose all liens
securing payment hereof, (iv)&nbsp;pursue any and all other rights, remedies and recourses available to
the holder hereof, including but not limited to any such rights, remedies or recourses under the
Loan Documents, at law or in equity, or (v)&nbsp;pursue any combination of the foregoing; and in the
event default is made in the prompt payment of this Note when due or declared due, and the same is
placed in the hands of an attorney for collection, or suit is brought on same, or the same is
collected through probate, bankruptcy or other judicial proceedings, then the Borrower agrees and
promises to pay all costs of collection, including reasonable attorney&#146;s fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U><I>No Usury Intended; Usury Savings Clause</I></U>. In no event shall interest contracted
for, charged or received hereunder, plus any other charges in connection herewith which constitute
interest, exceed the maximum interest permitted by applicable law. The amounts of such interest or
other charges previously paid to the holder of the Note in excess of the amounts permitted by
applicable law shall be applied by the holder of the Note to reduce the principal of the
indebtedness evidenced by the Note, or, at the option of the holder of the Note, be refunded. To
the extent permitted by applicable law, determination of the legal maximum amount of interest shall
at all times be made by amortizing, prorating, allocating and spreading in equal parts during the
period of the full stated term of the loan and indebtedness, all interest at any time contracted
for, charged or received from the Borrower hereof in connection with the loan and indebtedness
evidenced hereby, so that the actual rate of interest on account of such indebtedness is uniform
throughout the term hereof.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U><I>Security</I></U>. This Note has been executed and delivered pursuant to the Loan
Agreement, and is secured by, <I>inter alia</I>, the following:
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a Security Agreement, of even date herewith, by and between Trade Source
International, Inc., a Delaware corporation, and Lender, covering certain collateral as more
particularly described therein;
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a Security Agreement, of even date herewith, by and between Durocraft
International, Inc., a Texas corporation, and Lender, covering certain collateral as more
particularly described therein;
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) a Security Agreement, of even date herewith, by and between Design Trends, LLC, a
Delaware limited liability company, and Lender, covering certain collateral as more
particularly described therein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) a Security Agreement, of even date herewith, by and between Prime/Home Impressions,
LLC, a North Carolina limited liability company, and Lender, covering certain collateral as
more particularly described therein; and
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) a Security Agreement, of even date herewith, by and between Borrower and Lender,
covering certain collateral as more particularly described therein;
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note, the Loan Agreement and all other documents evidencing, securing, governing,
guaranteeing and/or pertaining to this Note, including but not limited to those documents described
above, are hereinafter collectively referred to as the &#147;<U>Loan Documents</U>.&#148; The holder of
this Note is entitled to the benefits and security provided in the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U><I>Joint and Several Liability; Waiver</I></U>. Each maker, signer, surety and endorser
hereof, as well as all heirs, successors and legal representatives of said parties, shall be
directly and primarily, jointly and severally, liable for the payment of all indebtedness
hereunder. Lender may release or modify the obligations of any of the foregoing persons or
entities, or guarantors hereof, in connection with this loan without affecting the obligations of
the others. All such persons or entities expressly waive presentment and demand for payment,
notice of default, notice of intent to accelerate maturity, notice of acceleration of maturity,
protest, notice of protest, notice of dishonor, and all other notices and demands for which waiver
is not prohibited by law, and diligence in the collection hereof; and agree to all renewals,
extensions, indulgences, partial payments, releases or exchanges of collateral, or taking of
additional collateral, with or without notice, before or after maturity. No delay or omission of
Lender in exercising any right hereunder shall be a waiver of such right or any other right under
this Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U><I>Texas Finance Code</I></U>. In no event shall Chapter&nbsp;346 of the Texas Finance Code
(which regulates certain revolving loan accounts and revolving tri-party accounts) apply to this
Note. To the extent that Chapter&nbsp;303 of the Texas Finance Code is applicable to this Note, the
&#147;weekly ceiling&#148; specified in such article is the applicable ceiling; provided that, if any
applicable law permits greater interest, the law permitting the greatest interest shall apply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U><I>Governing Law, Venue</I></U>. This Note is being executed and delivered, and is intended
to be performed in the State of Texas. Except to the extent that the laws of the United States may
apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity,
construction, enforcement and interpretation of this
Note. In the event of a dispute involving
this
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Note or any other instruments executed in connection herewith, the undersigned irrevocably
agrees that venue for such dispute shall lie in any court of competent jurisdiction in Bexar
County, Texas.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U><I>Purpose of Loan</I></U>. Borrower agrees that no advances under this Note shall be used
for personal, family or household purposes, and that all advances hereunder shall be used solely
for business, commercial, investment, or other similar purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U><I>Captions</I></U>. The captions in this Note are inserted for convenience only and are not
to be used to limit the terms herein.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;<U><I>Financial Information.</I></U> Borrower agrees to promptly furnish such financial
information and statements, including financial statements in a format acceptable to Lender, lists
of assets and liabilities, agings of receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to Borrower&#146;s financial condition and
business operations as Lender may request from time to time. This provision shall not alter the
obligation of Borrower 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;<U><I>Renewal and Extension</I></U>. This Note is given, in part, in renewal and extension, but
not extinguishment, of all amounts left owing and unpaid on that certain Revolving Promissory Note
dated November&nbsp;6, 2001 executed and delivered by Borrower and payable to the order of Lender in the
original principal amount of $20,000,000.00 and that certain Promissory Note dated February&nbsp;25,
2005 executed by Borrower and payable to the order of Lender in the original principal amount of
$3,000,000.00.
</DIV>

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    <TD colspan="3" align="left"><U>BORROWER</U>:<BR>
<BR>
CRAFTMADE INTERNATIONAL, INC.,<BR>
a Delaware corporation<BR>
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    <TD>&nbsp;</TD>
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    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Brad Heimann
&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Brad Heimann, President&nbsp;</TD>
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