LOAN AND SECURITY AGREEMENT

Exhibit 10.1

CRAFTMADE INTERNATIONAL, INC.,

as Borrower

LOAN AND SECURITY AGREEMENT

Dated as of July 8, 2009

$40,000,000

BANK OF AMERICA, N.A .,

as Lender

TABLE OF CONTENTS

LIST OF SCHEDULES

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT is dated as of July 8, 2009 (this “ Agreement ”, among CRAFTMADE INTERNATIONAL, INC. , a Delaware corporation (“ Borrower ”), the other Loan Parties identified on the signature pages to this Agreement or otherwise from time to time party hereto, and BANK OF AMERICA, N.A. , a national banking association (“ Lender ”).

R E C I T A L S :

Borrower has requested that Lender provide a credit facility to Borrower to finance its business enterprise. Lender is willing to provide the credit facility on the terms and conditions set forth in this Agreement.

NOW, THEREFORE , for valuable consideration hereby acknowledged, the parties agree as follows:

SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION

1.1. Definitions . As used herein, the following terms have the meanings set forth below:

Account : as defined in the UCC, including all rights to payment for goods sold or leased, or for services rendered.

Account Debtor : a Person who is obligated under an Account, Chattel Paper or General Intangible.

Accounts Formula Amount : the sum of (a) the lesser of (i) $5,000,000 and (ii) with respect to any other Extended Terms Accounts, 65% of the Value of Extended Terms Accounts constituting Eligible Accounts, plus (b) 85% of the Value of Standard Terms Accounts and Unbilled Accounts, in each case, constituting Eligible Accounts; provided , however , that, in Lender’s Permitted Discretion, each such percentage shall be reduced by 1.0% for each whole percentage point (or portion thereof) that the Dilution Percent exceeds 5.0%.

Affiliate : with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have correlative meanings.

Allianz : Allianz Life Insurance Company of North America, a Minnesota corporation, and it successors and assigns.

Allianz Debt : Debt owed by CM Real Estate to Allianz in the original principal amount of $11,000,000 with an outstanding balance of $9,780,359 as of the Closing Date, evidenced by that certain Promissory Note dated November 14, 2007, executed by CM Real Estate in favor of Allianz and secured or supported by that certain (i) Deed of Trust, Mortgage and Security Agreement made by CM Real Estate dated as of November 14, 2007, to Patrick M. Arnold, as trustee for the benefit of Allianz, (ii) Assignment of Rents and Leases dated as of November 14, 2007, between Borrower and Allianz, (iii) Environmental Indemnity dated as of November 14, 2007, from CM Real Estate and Borrower in favor of Allianz and (iv) Guaranty Agreement dated as of November 14, 2007, from Borrower to Allianz guaranteeing payment of the Allianz Debt, in each case as in effect on the date hereof.

Allocable Amount : as defined in Section 5.9.3 .

Anti-Terrorism Laws : any laws relating to terrorism or money laundering, including the Patriot Act.

Applicable Law : all laws, rules, regulations and governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law, common law and equitable principles, and all provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities.

Applicable Margin : with respect to any Type of Loan, the margin set forth below, as determined by the Fixed Charge Coverage Ratio for the last Fiscal Quarter:

Until June 30, 2009, margins shall be determined as if Level I were applicable. At all times after June 30, 2009, the margins shall be subject to increase or decrease upon receipt by Lender pursuant to Section 10.1.2 of the financial statements and corresponding Compliance Certificate for the last Fiscal Quarter, which change shall be effective on the first day of the calendar month following receipt. If, by the first day of a month, any financial statements and Compliance Certificate due in the preceding month have not been received, then, at the option of Lender, the margins shall be determined as if Level III were applicable, from such day until the first day of the calendar month following actual receipt.

Applicable Rate : for any month the average daily balance of Loans and stated amount of Letters of Credit is less than fifty percent (50%) of the Commitment, 0.50% per annum, and for any other month 0.25% per annum.

Asset Disposition : a sale, lease, license, transfer or other disposition of Property of an Obligor, including a disposition of Property in connection with a sale-leaseback transaction or synthetic lease.

Availability : the Borrowing Base minus the principal balance of all Loans.

Availability Reserve : the sum (without duplication) of (a) $155,0000 or such other greater or lesser amount as Lender, in its sole discretion, elects to impose from time to time; (b) the Inventory Reserve; (c) the Rent and Charges Reserve; (d) the LC Reserve; (e) the Bank Product Reserve; (f) all accrued Royalties, whether or not then due and payable by any Loan Party; (g) the aggregate amount of liabilities secured by Liens upon Collateral that are senior to Lender’s Liens (but imposition of any such reserve shall not waive an Event of Default arising therefrom); and (h) such additional reserves, in such amounts and with respect to such matters, as Lender in its Permitted Discretion may elect to impose from time to time.

Bank Product : any of the following products, services or facilities extended to any Loan Party or Subsidiary by Lender or any of its Affiliates: (a) Cash Management Services; (b) products under Hedging Agreements; (c) commercial credit card and merchant card services; and (d) leases and other banking products or services as may be requested by any Loan Party or Subsidiary, other than Letters of Credit.

Bank Product Debt : Debt and other obligations of an Obligor relating to Bank Products.

Bank Product Reserve : the aggregate amount of reserves established by Lender from time to time in its Permitted Discretion in respect of Bank Product Debt.

Bankruptcy Code : Title 11 of the United States Code.

Base Rate : for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c) LIBOR for a 30 day interest period as determined on such day, plus 1.0%.

Base Rate Loan : any Loan that bears interest based on the Base Rate.

Board of Governors : the Board of Governors of the Federal Reserve System.

Borrowed Money : with respect to any Obligor, without duplication, its (a) Debt that (i) arises from the lending of money by any Person to such Obligor, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents or similar instruments, (iii) accrues interest or is a type upon which interest charges are customarily paid (excluding trade payables owing in the Ordinary Course of Business), or (iv) was issued or assumed as full or partial payment for Property; (b) Capital Leases; (c) reimbursement obligations with respect to letters of credit; and (d) guaranties of any Debt of the foregoing types owing by another Person.

Borrowing : a group of Loans of one Type that are made on the same day or are converted into Loans of one Type on the same day.

Borrowing Base : on any date of determination, an amount equal to the lesser of (a) the Commitment, minus the LC Reserve; or (b) the sum of the Accounts Formula Amount, plus the Inventory Formula Amount, minus the Availability Reserve, minus the EBITDA Reserve; provided that, from the date of any Dolan Acquisition until the date Lender completes its review of the assets so acquired, the increase (if any) in the Borrowing Base attributable to such assets shall not exceed $1,500,000.

Borrowing Base Certificate : a certificate, in form and substance satisfactory to Lender, by which Borrower certifies calculation of the Borrowing Base.

Business Day : any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, North Carolina or Texas, and if such day relates to a LIBOR Loan, any such day on which dealings in Dollar deposits are conducted between banks in the London interbank Eurodollar market.

Capital Expenditures : all liabilities incurred, expenditures made or payments due (whether or not made) by a Loan Party or Subsidiary for the acquisition of any fixed assets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year, including the principal portion of Capital Leases.

Capital Lease : any lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

Cash Collateral : cash, and any interest or other income earned thereon, that is delivered to Lender to Cash Collateralize any Obligations.

Cash Collateral Account : a demand deposit, money market or other account maintained with Lender and subject to Lender’s Liens.

Cash Collateralize : the delivery of cash to Lender, as security for the payment of Obligations, in an amount equal to (a) with respect to LC Obligations, 105% of the aggregate LC Obligations, and (b) with respect to any inchoate, contingent or other Obligations (including Obligations arising under Bank Products), Lender’s good faith estimate of the amount due or to become due, including all fees and other amounts relating to such Obligations. “ Cash Collateralization ” has a correlative meaning.

Cash Equivalents : (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and credit of, the United States government, maturing within 12 months of the date of acquisition; (b) certificates of deposit, time deposits and bankers’ acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by a commercial bank organized under the laws of the United States or any state or district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody’s at the time of acquisition, and (unless issued by Lender) not subject to offset rights; (c) repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered into with any bank meeting the qualifications specified in clause (b); (d) commercial paper rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and maturing within nine months of the date of acquisition; and (e) shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000 and has the highest rating obtainable from either Moody’s or S&P.

Cash Management Services : any services provided from time to time by Lender or any of its Affiliates to any Loan Party or Subsidiary in connection with operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.

CERCLA : the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq .).

Change in Law : the occurrence, after the date hereof, of (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority; or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

Change of Control : (a) any “person” or “group” (as such terms are used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any employee benefit plan of such person and its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), excluding the Permitted Holders, shall become the “beneficial owner” (as defined in rules 13(d)-3 and 13(d)-5 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than the greater of (x) 30% or more of the then outstanding equity securities of Borrower entitled to vote for members of the board of directors or equivalent governing body or (y) the percentage of equity securities of Borrower entitled to vote for members of the board of directors or equivalent governing body, or (b) the board of directors of Borrower ceases to consist of a majority of the Continuing Directors.

Claims : all liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind (including remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses) at any time (including after Full Payment of the Obligations) incurred by or asserted against any Indemnitee in any way relating to (a) any Loans, Letters of Credit, Loan Documents, or the use thereof or transactions relating thereto, (b) any action taken or omitted to be taken by any Indemnitee in connection with any Loan Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral, (d) exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform or observe any terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration or other proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a party thereto.

Closing Date : the date on which (a) each of the conditions set forth in Section 6.1 is satisfied and (b) the initial Loans are made hereunder.

CM Real Estate : CM Real Estate, LLC, a Texas limited liability company and wholly-owned Subsidiary of Borrower, and its successors and assigns.

Code : the Internal Revenue Code of 1986.

Collateral : all Property described in Section 7.1 , all Property described in any Security Documents as security for any Obligations, and all other Property that now or hereafter secures (or is intended to secure) any Obligations.

Commitment : Lender’s obligation to make Loans and to issue Letters of Credit in an amount up to $40,000,000 in the aggregate.

Commitment Termination Date : the earliest to occur of (a) the Termination Date; (b) the date on which Borrower terminates the Commitment pursuant to Section 2.1.3 ; or (c) the date on which the Commitment is terminated pursuant to Section 11.2 .

Compliance Certificate : a certificate, in form and substance satisfactory to Lender, by which Borrower certifies compliance with Sections 10.2.3 and 10.3 , lists, upon Lender’s request, certain outstanding Bank Products and calculates the applicable Level for the Applicable Margin.

Contingent Obligation : any obligation of a Person arising from a guaranty, indemnity or other assurance of payment or performance of any Debt, lease, dividend or other obligation (“ primary obligations ”) of another obligor (“ primary obligor ”) in any manner, whether directly or indirectly, including any obligation of such Person under any (a) guaranty, endorsement, co-making or sale with recourse of an obligation of a primary obligor; (b) obligation to make take-or-pay or similar payments regardless of nonperformance by any other party to an agreement; and (c) arrangement (i) to purchase any primary obligation or security therefor, (ii) to supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure working capital, equity capital, net worth or solvency of the primary obligor, (iv) to purchase Property or services for the purpose of assuring the ability of the primary obligor to perform a primary obligation, or (v) otherwise to assure or hold harmless the holder of any primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be the stated or determinable amount of the primary obligation (or, if less, the maximum amount for which such Person may be liable under the instrument evidencing the Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto.

Continuing Directors : the directors of Borrower on the Closing Date and each other director, if, in each case, such other directors’ nomination for election to the board of directors of Borrower is recommended by a majority of the then Continuing Directors of such other director receives the vote of the Permitted Holders in his or her election by the stockholders of Borrower.

Coppell Facility : the real estate located at 650 South Royal Lane, Coppell, Texas.

Covenant Condition : the following conditions with respect to each transaction or event to which such conditions apply: (a) both immediately before and immediately after giving effect to such transaction or event, Availability is greater than $6,000,000 (b) on a pro forma basis, Availability would not have been less than $6,000,000 on any day during the 30 day period immediately preceding the date of such transaction or event if the transaction or event had occurred at the beginning of such 30 day period, (c) on a pro forma basis and after giving effect to such transaction or event, Availability will not be less than $6,000,000 on any day during the 30 day period immediately following the date of such transaction or event; (d) no Default or Event of Default exists both before and after giving effect to such transaction; (e) as of the end of each of the two months immediately preceding the date of such transaction or event for which Lender has received the financial statements and corresponding Compliance Certificate required under Section 10.1.2 , the Fixed Charge Coverage Ratio for the trailing twelve month period then ending is at least 1.25 to 1.00; and (f) a Senior Officer of Borrower shall have certified in writing to Lender, not less than five Business Days prior to the date of such transaction or event, that all of the conditions set forth in the foregoing clauses (a) through (e) have been or will be satisfied on the date of such transaction or event accompanied by calculations setting forth in reasonable detail, compliance with such conditions.

CWA : the Clean Water Act (33 U.S.C. §§ 1251 et seq .).

Debt : as applied to any Person, without duplication, (a) all items that would be included as liabilities on a balance sheet in accordance with GAAP, including Capital Leases, but excluding trade payables incurred and being paid in the Ordinary Course of Business; (b) all Contingent Obligations; (c) all reimbursement obligations in connection with letters of credit issued for the account of such Person; and (d) in the case of Borrower and the other Loan Parties, the Obligations. The Debt of a Person shall include any recourse Debt of any partnership in which such Person is a general partner or joint venturer.

Default : an event or condition that, with the lapse of time or giving of notice, would constitute an Event of Default.

Default Rate : for any Obligation (including, to the extent permitted by law, interest not paid when due), 2% plus the interest rate otherwise applicable thereto.

Deposit Account Control Agreements : the Deposit Account control agreements to be executed by each institution maintaining a Deposit Account for any Loan Party, in favor of Lender, as security for the Obligations.

Design Trends : Design Trends, LLC, a Delaware limited liability company together with its successors and permitted assigns.

Dilution Percent : the percent, determined for Borrower’s most recent Fiscal Quarter, for the Loan Parties, taken as a whole, equal to (a) without duplication, bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive items with respect to Accounts, divided by (b) gross sales.

Distribution : any declaration or payment of a distribution, interest or dividend on any Equity Interest (other than payment-in-kind); any distribution, advance or repayment of Debt to a holder of Equity Interests; or any purchase, redemption, or other acquisition or retirement for value of any Equity Interest.

Dolan Acquisition : any acquisition (subject to Lender’s prior written consent) by any Loan Party on or after the Closing Date of membership interests in Design Trends from Dolan Northwest, LLC, an Oregon limited liability company, and assets from A-boy Supply Co., Inc., an Oregon corporation, d/b/a Dolan Designs.

Dollars : lawful money of the United States.

Dominion Account : a special account established by Borrower at Lender or a bank acceptable to Lender, over which Lender has exclusive control for withdrawal purposes.

Dominion Date : the first date on which Borrower satisfies the requirements of Section 10.1.10 .

DT LLC Agreement that certain Limited Liability Company Agreement of Design Trends, dated August 3, 1999 as in effect on the date hereof and as thereafter amended, modified or supplemented with the prior written consent of Lender.

EBITDA : determined on a consolidated basis for Borrower and Subsidiaries, net income, calculated before interest expense, provision for income taxes, depreciation and amortization expense, stock compensation expense, minority interest adjustments in respect of Design Trends, gains or losses arising from the sale of capital assets, gains arising from the write-up of assets, and any extraordinary gains (in each case, to the extent included in determining net income), plus the aggregate transaction costs and expenses incurred by Borrower and the other Loan Parties in connection with closing this Agreement, provided that such add-back shall not include any such costs and expenses incurred more than 60 days following the Closing Date.

EBITDA Reserve : an amount equal to $500,000 until such time as Borrower delivers a Compliance Certificate pursuant to Section 10.1.2(c) for any period ending on or after August 31, 2009 certifying that no Default or Event of Default exists and that the Fixed Charge Coverage Ratio of the Borrower is greater than 1.00 to 1.0, at which time the EBITDA Reserve shall be an amount equal to $0.

Eligible Account : Account owing to a Loan Party that arises in the Ordinary Course of Business from the sale of goods , is payable in Dollars and is deemed by Lender, in its Permitted Discretion, to be an Eligible Account. Without limiting the foregoing, no Account shall be an Eligible Account if (a) it is unpaid for more than (i) in the case of Extended Terms Accounts, 30 days after the original due date, or more than 200 days after the original invoice date, (ii) in the case of Standard Terms Accounts, 60 days after the original due date or more than 120 days after the original invoice date or (iii) in the case of Unbilled Accounts, it is not billed or invoiced, in Dollars, within 30 days after the date such Unbilled Account was generated; (b) 50% or more of the Accounts owing by the Account Debtor are not Eligible Accounts under the foregoing clause; (c) when aggregated with other Accounts owing by the Account Debtor (other than Lowes or Wal-Mart), it exceeds 15% of the aggregate Eligible Accounts (or such higher percentage as Lender may establish for the Account Debtor from time to time), provided , however , that (x) only that portion of the Account which, when aggregated with the other Eligible Accounts of the applicable Account Debtor, exceeds the applicable percentage shall be excluded from the calculation of Eligible Accounts, and (y) Accounts of the applicable Account Debtor which, in the aggregate, exceed the limits set forth above shall be deemed to constitute Eligible Accounts (subject to compliance with all other standards of eligibility) if the Accounts exceeding such limits are backed or secured by a letter of credit reasonably satisfactory to Lender in all respects and such letter of credit has been assigned to Lender on terms acceptable to Lender in its sole discretion; (d) the Account Debtor of such Account is Lowes or Wal-Mart and such Account when aggregated with all other Accounts owing by Lowes or Wal-Mart, as applicable exceeds 30% of the total of the Accounts of all Credit Parties (or such higher percentage as Lender may establish for Lowes or Wal-Mart from time to time) ), provided , however , that (x) only that portion of the Account which, when aggregated with the other Eligible Accounts of the Lowes or Wal-Mart, as applicable, exceeds the applicable percentage shall be excluded from the calculation of Eligible Accounts, and (y) Accounts of Lowes or Wal-Mart which, in the aggregate, exceed the limits set forth above shall be deemed to constitute Eligible Accounts (subject to compliance with all other standards of eligibility) if the Accounts exceeding such limits are backed or secured by a letter of credit reasonably satisfactory to Lender in all respects and such letter of credit has been assigned to Lender on terms acceptable to Lender in its sole discretion; (e) it does not conform with a covenant or representation herein; (f) it is owing by a creditor or supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be limited to the amount thereof); (g) an Insolvency Proceeding has been commenced by or against the Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, or is not Solvent; or the applicable Loan Party is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (h) the Account Debtor is organized or has its principal offices or assets outside the United States or Canada; (i) it is owing by a Government Authority, unless the Account Debtor is the United States or any department, agency or instrumentality thereof and the Account has been assigned to Lender in compliance with the Assignment of Claims Act; (j) it is not subject to a duly perfected, first priority Lien in favor of Lender, or is subject to any other Lien (other than the Lien securing the Lackey Earn-Out so long as such Lien is at all times junior to Lender’s Lien); (k) the goods giving rise to it have not been delivered to and accepted by the Account Debtor, the services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent a final sale; (l) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (m) its payment has been extended, the Account Debtor has made a partial payment, or it arises from a sale on a cash-on-delivery basis; (n) it arises from a sale to an Affiliate, from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or from a sale to a Person for personal, family or household purposes; (o) it represents a progress billing or retainage; or (p) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof. In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 120 days old in the case of Standard Terms Accounts and 200 days old in the case of Extended Terms Accounts will be excluded.

Eligible In-Transit Inventory : Inventory owned by a Loan Party that would be Eligible Inventory if it were not subject to a Document and in transit from a foreign location to a location of a Loan Party within the United States, and that Lender, in its Permitted Discretion, deems to be Eligible In-Transit Inventory. Without limiting the foregoing, no Inventory shall be Eligible In-Transit Inventory unless it (a) is subject to a negotiable Document showing Lender (or, with the consent of Lender, the applicable Loan Party) as consignee, which Document is in the possession of Lender or such other Person as Lender shall approve; (b) is fully insured in a manner satisfactory to Lender; (c) has been identified to the applicable sales contract and title has passed to a Loan Party; (d) is not sold by a vendor that has a right to reclaim, divert shipment of, repossess, stop delivery, claim any reservation of title or otherwise assert Lien rights against the Inventory, or with respect to whom any Loan Party is in default of any obligations; (e) is subject to purchase orders and other sale documentation satisfactory to Lender; (f) is shipped by a common carrier that is not affiliated with the vendor; and (g) is being handled by a customs broker, freight-forwarder or other handler that has delivered a Lien Waiver.

Eligible Inventory : Inventory owned by a Loan Party that Lender, in its Permitted Discretion, deems to be Eligible Inventory. Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished goods or raw materials, and not work-in-process, packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or downpayment; (c) is in new and saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein; (g) is subject to Lender’s duly perfected, first priority Lien, and no other Lien; (h) is within the continental United States or Canada, is not in transit except between locations of Loan Parties, and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts such Borrower’s or Lender’s right to dispose of such Inventory, unless Lender has received an appropriate Lien Waiver; and (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; and (l) is Eligible In-Transit Inventory or is or would be reflected in the details of a current perpetual inventory report.

Enforcement Action : any action to enforce any Obligations or Loan Documents or to realize upon any Collateral (whether by judicial action, self-help, notification of Account Debtors, exercise of setoff or recoupment, or otherwise).

Environmental Agreement : each agreement of a Loan Party with respect to any Real Estate subject to a Mortgage, pursuant to which such Loan Party agrees to indemnify and hold harmless Lender from liability under any Environmental Laws.

Environmental Laws : all Applicable Laws (including all programs, permits and guidance promulgated by regulatory agencies), relating to public health (but excluding occupational safety and health, to the extent regulated by OSHA) or the protection or pollution of the environment, including CERCLA, RCRA and CWA.

Environmental Notice : a notice (whether written or oral) from any Governmental Authority or other Person of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint, summons, citation, order, claim, demand or request for correction, remediation or otherwise.

Environmental Release : any spilling, leaking, pumping, pouring, emitting, discharging, dumping or disposing into the environment of any hazardous substance (as defined in CERCLA) or any pollutant, contaminant, material or substance that is regulated under any applicable Environmental Law.

Equity Interest : the interest of any (a) shareholder in a corporation; (b) partner in a partnership (whether general, limited, limited liability or joint venture); (c) member in a limited liability company; or (d) other Person having any other form of equity security or ownership interest.

ERISA : the Employee Retirement Income Security Act of 1974.

ERISA Affiliate : any trade or business (whether or not incorporated) under common control with an Obligor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

ERISA Event : (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) any Obligor or ERISA Affiliate fails to meet any funding obligations with respect to any Pension Plan or Multiemployer Plan, or requests a minimum funding waiver; (f) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate.

Event of Default : as defined in Section 11 .

Excluded Tax : with respect to Lender or any other recipient of a payment to be made by or on account of any Obligation, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of Lender, in which its applicable lending office is located; and (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any Loan Party is located.

Extended Terms Account : Any Account arising from the sale of inventory in the ordinary course of business of any Loan Party for which the original due date specified for such Account is more than 90 days after the original invoice date.

Extraordinary Expenses : all costs, expenses or advances that Lender may incur during a Default or Event of Default, or during the pendency of an Insolvency Proceeding of an Obligor, including those relating to (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against Lender, any Obligor, any representative of creditors of an Obligor or any other Person) in any way relating to any Collateral (including the validity, perfection, priority or avoidability of Lender’s Liens with respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender liability or other Claims; (c) the exercise, protection or enforcement of any rights or remedies of Lender in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; and (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations. Such costs, expenses and advances include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’ fees and commissions, auctioneers’ fees and commissions, accountants’ fees, reasonable environmental study fees, wages and salaries paid to employees of any Obligor or independent contractors in liquidating any Collateral, and travel expenses.

Federal Funds Rate : (a) the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on the applicable Business Day (or on the preceding Business Day, if the applicable day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if no such rate is published on the next Business Day, the average rate (rounded up, if necessary, to the nearest 1/8 of 1%) charged to Lender on the applicable day on such transactions, as determined by Lender.

Fee Letter : the letter agreement, dated July 8, 2012 between Borrower and Lender.

Fiscal Quarter : each period of three months, commencing on the first day of a Fiscal Year.

Fiscal Year : the fiscal year of Borrower and Subsidiaries for accounting and tax purposes, ending on June 30 of each year.

Fixed Charge Coverage Ratio : for any period, the ratio, determined on a consolidated basis for Loan Parties and Subsidiaries as of the last day of the period ending on such date, of (a) EBITDA for such period, to (b) Fixed Charges for such period.

Fixed Charges : the sum of interest expense (other than payment-in-kind), principal payments made on Borrowed Money, Capital Expenditures (except those financed with Borrowed Money other than Loans), cash taxes, and Distributions made to any Person other than a Loan Party.

FLSA : the Fair Labor Standards Act of 1938.

Foreign Plan : any employee benefit plan or arrangement (a) maintained or contributed to by any Obligor or Subsidiary that is not subject to the laws of the United States; or (b) mandated by a government other than the United States for employees of any Obligor or Subsidiary.

Foreign Subsidiary : a Subsidiary that is a “controlled foreign corporation” under Section 957 of the Code, such that a guaranty by such Subsidiary of the Obligations or a Lien on the assets of such Subsidiary to secure the Obligations would result in material tax liability to Borrower.

Frost : The Frost National Bank.

Frost Account : the deposit account maintained by Borrower at Frost with an account number ending in 2490.

Frost Debt : Debt owed by Woodard to Frost in the original principal amount of $3,500,000 evidenced by that certain Term Loan Agreement dated as of July 8, 2009, by and among Borrower, Woodard and Frost and that certain Term Loan Note (Floating Rate) dated as of July 8, 2009, executed by Woodard in favor of Frost, as secured or supported by the other Frost Documents.

Frost Documents : that certain (a) Term Loan Agreement dated as of July 8, 2009, by and among Borrower, Woodard and Frost, (b) that certain Term Loan Note (Floating Rate) dated as of July 8, 2009, executed by Woodard in favor of Frost, (c) Mortgage dated as of July 8, 2009, made by Woodard for the benefit of Frost, (d) Guaranty Agreement dated as of July 8, 2009, made by Borrower in favor of Frost, (e) Guaranty Agreement dated as of July 8, 2009, made by Trade Source in favor of Frost, (f) Guaranty Agreement dated as of July 8, 2009, made by Durocraft International, Inc., a Texas corporation, in favor of Frost, (g) Guaranty Agreement dated as of July 8, 2009, made by C/D/R Incorporated, a Delaware corporation, in favor of Frost, (h) Guaranty Agreement dated as of July 8, 2009, made by Prime/Home Impressions, LLC, a North Carolina limited liability company, in favor of Frost and (i) Guaranty Agreement dated as of July 8, 2009, made by Design Trends in favor of Frost.

Full Payment : with respect to any Obligations, (a) the full and indefeasible cash payment thereof, including any interest, fees and other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding); (b) if such Obligations are LC Obligations or inchoate or contingent in nature, Cash Collateralization thereof (or delivery of a standby letter of credit acceptable to Lender in its discretion, in the amount of required Cash Collateral); and (c) a release of any Claims of Obligors against Lender arising on or before the payment date. The Loans shall not be deemed to have been paid in full until the Commitment has expired or been terminated.

GAAP : generally accepted accounting principles in effect in the United States from time to time.

Governmental Approvals : all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and required reports to, all Governmental Authorities.

Governmental Authority : any federal, state, municipal, foreign or other governmental department, agency, commission, board, bureau, court, tribunal, instrumentality, political subdivision, or other entity or officer exercising executive, legislative, judicial, regulatory or administrative functions for or pertaining to any government or court, in each case whether associated with the United States, a state, district or territory thereof, or a foreign entity or government.

Guarantor Payment : as defined in Section 5.9.3 .

Guarantors : Woodard; Trade Source International, Inc., a Delaware corporation; Durocraft International, Inc., a Texas corporation; C/D/R Incorporated, a Delaware corporation; Prime/Home Impressions, LLC, a North Carolina limited liability company; Design Trends, and each other Person who guarantees payment or performance of any Obligations.

Guaranty : each guaranty agreement executed by a Guarantor in favor of Lender.

Hedging Agreement : an agreement relating to any swap, cap, floor, collar, option, forward, cross right or obligation, or combination thereof or similar transaction, with respect to interest rate, foreign exchange, currency, commodity, credit or equity risk.

Indemnified Taxes : Taxes other than Excluded Taxes.

Indemnitees : Lender and its officers, directors, employees, Affiliates, agents and attorneys.

Initial Woodard Appraisal : as defined in Section 6.1 .

Insolvency Proceeding : any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

Insurance Assignment : each collateral assignment of insurance pursuant to which an Obligor assigns to Lender such Obligor’s rights under key-man life, business interruption or other insurance policies as Lender deems appropriate, as security for the Obligations.

Intellectual Property : all intellectual and similar Property of a Person, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software and databases; all embodiments or fixations thereof and all related documentation, applications, registrations and franchises; all licenses or other rights to use any of the foregoing; and all books and records relating to the foregoing.

Intellectual Property Claim : any claim or assertion (whether in writing, by suit or otherwise) that a Loan Party’s or Subsidiary’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other Property violates another Person’s Intellectual Property.

Intellectual Property Security Agreement : each trademark security agreement pursuant to which an Obligor grants a Lien to Lender on such Obligor’s interests in trademarks, patents, copyrights, other Intellectual Property and intellectual property rights, as security for the Obligations.

Interest Period : as defined in Section 3.1.3 .

Inventory : as defined in the UCC, including all goods intended for sale, lease, display or demonstration; all work in process; and all raw materials, and other materials and supplies of any kind that are or could be used in connection with the manufacture, printing, packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or consumed in a Loan Party’s business (but excluding Equipment).

Inventory Formula Amount : the lesser of (a) $15,000,000; (b) the sum of (i) 60% of the Value of Eligible Inventory (other than Woodard Eligible Inventory), plus (ii) 65% of the Value of Woodard Eligible Inventory constituting finished goods, plus (iii) 19% of the Value of Woodard Eligible Inventory constituting raw materials; plus (iv) 60% of the Value of Eligible In-Transit Inventory (other than Woodard Eligible In-Transit Inventory), plus (v) 19% of Woodard Eligible In-Transit Inventory; and (c) 85% of the NOLV Percentage of the Value of Eligible Inventory.

Inventory Reserve : reserves established by Lender to reflect factors that may negatively impact the Value of Inventory, including change in salability, obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor chargebacks.

Investment : any acquisition of all or substantially all assets of a Person; any acquisition of record or beneficial ownership of any Equity Interests of a Person; or any advance or capital contribution to or other investment in a Person.

IRS : the United States Internal Revenue Service.

Lackey Earn-Out : the amounts required to be paid by Trade Source and Borrower to Robert Lackey pursuant to Section 2.04 of the Lackey Stock Purchase Agreement.

Lackey Stock Purchase Agreement : that certain Stock Purchase Agreement dated as of September 15, 2006 and effective as of July 1, 2006, among Trade Source, Robert Lackey and Borrower.

LC Application : an application by Borrower to Lender for issuance of a Letter of Credit, in form and substance satisfactory to Lender.

LC Conditions : the following conditions necessary for issuance of a Letter of Credit: (a) each of the conditions set forth in Section 6 ; (b) after giving effect to such issuance, total LC Obligations do not exceed the Letter of Credit Subline, no Overadvance exists and, if no Loans are outstanding, the LC Obligations do not exceed the Borrowing Base (without giving effect to the LC Reserve for purposes of this calculation); (c) the expiration date of such Letter of Credit is (i) no more than 365 days from issuance, in the case of standby Letters of Credit, (ii) no more than 120 days from issuance, in the case of documentary Letters of Credit, and (iii) at least 20 Business Days prior to the Termination Date; (d) the Letter of Credit and payments thereunder are denominated in Dollars; and (e) the purpose and form of the proposed Letter of Credit is satisfactory to Lender in its discretion.

LC Documents : all documents, instruments and agreements (including LC Requests and LC Applications) delivered by Borrower or any other Person to Lender in connection with issuance, amendment or renewal of, or payment under, any Letter of Credit.

LC Obligations : the sum (without duplication) of (a) all amounts owing by Borrower for any drawings under Letters of Credit; (b) the stated amount of all outstanding Letters of Credit; and (c) all fees and other amounts owing with respect to Letters of Credit.

LC Request : a request for issuance of a Letter of Credit, to be provided by Borrower, in form satisfactory to Lender.

LC Reserve : the aggregate of all LC Obligations, other than (a) those that have been Cash Collateralized; and (b) if no Default or Event of Default exists, those constituting charges owing to Lender.

Lender Professionals : attorneys, accountants, appraisers, auditors, business valuation experts, environmental engineers or consultants, turnaround consultants, and other professionals and experts retained by Lender.

Letter of Credit : any standby or documentary letter of credit issued by Lender for the account of a Loan Party, or any indemnity, guarantee, exposure transmittal memorandum or similar form of credit support issued by Lender for the benefit of a Loan Party.

Letter of Credit Subline : $5,000,000.

LIBOR : for any Interest Period with respect to a LIBOR Loan, the per annum rate of interest (rounded up, if necessary, to the nearest 1/8th of 1%), determined by Lender at approximately 11:00 a.m. (London time) two Business Days prior to commencement of such Interest Period, for a term comparable to such Interest Period, equal to (a) the British Bankers Association LIBOR Rate (“ BBA LIBOR ”), as published by Reuters (or other commercially available source designated by Lender); or (b) if BBA LIBOR is not available for any reason, the interest rate at which Dollar deposits in the approximate amount of the LIBOR Loan would be offered by Lender’s London branch to major banks in the London interbank Eurodollar market. If the Board of Governors imposes a Reserve Percentage with respect to LIBOR deposits, then LIBOR shall be the foregoing rate, divided by 1 minus the Reserve Percentage.

LIBOR Loan : each set of Loans having a common length and commencement of Interest Period.

License : any license or agreement under which an Obligor is authorized to use Intellectual Property in connection with any manufacture, marketing, distribution or disposition of Collateral, any use of Property or any other conduct of its business.

Licensor : any Person from whom an Obligor obtains the right to use any Intellectual Property.

Lien : any Person’s interest in Property securing an obligation owed to, or a claim by, such Person, whether such interest is based on common law, statute or contract, including liens, security interests, pledges, hypothecations, statutory trusts, reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Property.

Lien Waiver : an agreement, in form and substance satisfactory to Lender, by which (a) for any material Collateral located on leased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and agrees to permit Lender to enter upon the premises and remove the Collateral or to use the premises to store or dispose of the Collateral; (b) for any Collateral held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the Collateral, agrees to hold any Documents in its possession relating to the Collateral as agent for Lender, and agrees to deliver the Collateral to Lender upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Lender’s Lien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver the Collateral to Lender upon request; and (d) for any Collateral subject to a Licensor’s Intellectual Property rights, the Licensor grants to Lender the right, vis-à-vis such Licensor, to enforce Lender’s Liens with respect to the Collateral, including the right to dispose of it with the benefit of the Intellectual Property, whether or not a default exists under any applicable License.

Loan : a loan made pursuant to Section 2.1 .

Loan Account : the loan account established by Lender on its books pursuant to Section 5.7 .

Loan Documents : this Agreement, Other Agreements and Security Documents.

Loan Party : Borrower and any Subsidiary of Borrower that is a Guarantor.

Loan Year : each 12 month period commencing on the date hereof and on each anniversary of the date hereof.

Lowes : Lowes Companies, Inc., a North Carolina corporation, and its Subsidiaries and Affiliates.

Margin Stock : as defined in Regulation U of the Board of Governors.

Material Adverse Effect : the effect of any event or circumstance that, taken alone or in conjunction with other events or circumstances, (a) has or could be reasonably expected to have a material adverse effect on the business, operations, Properties, or financial condition of the Loan Parties, taken as a whole, on the value of any material Collateral, on the enforceability of any Loan Documents, or on the validity or priority of Lender’s Liens on any Collateral; (b) impairs the ability of the Loan Parties, taken as a whole, to perform any obligations under the Loan Documents, including repayment of any Obligations; or (c) otherwise impairs in any material respect the ability of Lender to enforce or collect any Obligations or to realize upon any Collateral.

Material Contract : any agreement or arrangement to which a Loan Party or Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities law applicable to such Obligor, including the Securities Act of 1933; (b) for which breach, termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect; or (c) that relates to Subordinated Debt, or Debt in an aggregate amount of $1,000,000 or more.

Moody’s : Moody’s Investors Service, Inc., and its successors.

Mortgage : each mortgage, deed of trust or deed to secure debt pursuant to which an Obligor grants a Lien to Lender on the Real Estate owned by such Obligor, as security for the Obligations.

Multiemployer Plan : any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

Net Proceeds : with respect to an Asset Disposition, proceeds (including, when received, any deferred or escrowed payments) received by a Loan Party or Subsidiary in cash from such disposition, net of (a) reasonable and customary costs and expenses actually incurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by a Permitted Lien senior to Lender’s Liens on Collateral sold; (c) transfer or similar taxes; and (d) reserves for indemnities, until such reserves are no longer needed.

NOLV Percentage : the net orderly liquidation value of Inventory, expressed as a percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent appraisal of Borrower’s Inventory performed by an appraiser and on terms satisfactory to Lender.

Notice of Borrowing : a Notice of Borrowing to be provided by Borrower to request a Borrowing of Loans, in form satisfactory to Lender.

Notice of Conversion/Continuation : a Notice of Conversion/Continuation to be provided by Borrower to request a conversion or continuation of any Loans as LIBOR Loans, in form satisfactory to Lender.

Obligations : all (a) principal of and premium, if any, on the Loans, (b) LC Obligations and other obligations of Obligors with respect to Letters of Credit, (c) interest, expenses, fees and other sums payable by Obligors under Loan Documents, (d) obligations of Obligors under any indemnity for Claims, (e) Extraordinary Expenses, (f) Bank Product Debt, and (g) other Debts, obligations and liabilities of any kind owing by any Obligor to Lender, whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or several.

Obligor : Borrower, each Guarantor, or each other Person that is liable for payment of any Obligations or that has granted a Lien in favor of Lender on its assets to secure any Obligations.

Ordinary Course of Business : the ordinary course of business of any Loan Party or Subsidiary, consistent with past practices and undertaken in good faith.

Organic Documents : with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement, certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation or operation of such Person.

OSHA : the Occupational Safety and Hazard Act of 1970.

Other Agreement : each LC Document; Lien Waiver ; Real Estate Related Document; Borrowing Base Certificate, Compliance Certificate, financial statement or report delivered hereunder; or other document, instrument or agreement (other than this Agreement or a Security Document) now or hereafter delivered by an Obligor or other Person to Lender in connection with any transactions relating hereto.

Other Taxes : all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

Overadvance : as defined in Section 2.1.4 .

Patriot Act : the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

Payment Item : each check, draft or other item of payment payable to a Loan Party, including those constituting proceeds of any Collateral.

PBGC : the Pension Benefit Guaranty Corporation.

Pension Plan : any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA Affiliate or to which the Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the preceding five plan years.

Permitted Acquisition : subject to Section 10.2.20 and the satisfaction of each Covenant Condition as of the date such acquisition is consummated, acquisitions by any Loan Party of assets of another Person.

Permitted Asset Disposition : as long as no Default or Event of Default exists and all Net Proceeds are remitted to Lender, an Asset Disposition that is (a) a sale of Inventory in the Ordinary Course of Business; (b) a disposition of Equipment that, in the aggregate during any 12 month period, has a fair market or book value (whichever is more) of $250,000 or less; (c) a disposition of Inventory that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of Business; (d) a termination of a lease of real or personal Property that is not necessary for the Ordinary Course of Business, could not reasonably be expected to have a Material Adverse Effect and does not result from an Obligor’s default; or (e) approved in writing by Lender.

Permitted Contingent Obligations : Contingent Obligations (a) arising from endorsements of Payment Items for collection or deposit in the Ordinary Course of Business; (b) arising from Hedging Agreements permitted hereunder; (c) existing on the date hereof, and any extension or renewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (d) incurred in the Ordinary Course of Business with respect to surety, appeal or performance bonds, or other similar obligations; (e) arising from customary indemnification obligations in favor of purchasers in connection with dispositions of Equipment permitted hereunder; (f) arising under the Loan Documents; (g) arising in the Ordinary Course of Business in respect of obligations of any Loan Party which obligations do not constitute Debt of the types described in clauses (a), (c) and (d) of the definition thereof; or (h) in an aggregate amount of $250,000 or less at any time.

Permitted Discretion : a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

Permitted Lien : as defined in Section 10.2.2 .

Permitted Purchase Money Debt : Purchase Money Debt of the Loan Parties and Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not exceed $1,500,000 at any time and its incurrence does not violate Section 10.2.1 or Section 10.2.3 .

Person : any individual, corporation, limited liability company, partnership, joint venture, joint stock company, land trust, business trust, unincorporated organization, Governmental Authority or other entity.

Plan : any employee benefit plan (as such term is defined in Section 3(3) of ERISA) established by an Obligor or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

Prime Rate : the rate of interest announced by Lender from time to time as its prime rate. Such rate is set by Lender on the basis of various factors, including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such rate. Any change in such rate announced by Lender shall take effect at the opening of business on the day specified in the public announcement of such change.

Properly Contested : with respect to any obligation of an Obligor, (a) the obligation is subject to a bona fide dispute regarding amount or the Obligor’s liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to the satisfaction of Lender; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.

Property : any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

Purchase Money Debt : (a) Debt (other than the Obligations) for payment of any of the purchase price of fixed assets; (b) Debt (other than the Obligations) incurred within 10 days before or after acquisition of any fixed assets, for the purpose of financing any of the purchase price thereof; and (c) any renewals, extensions or refinancings (but not increases) thereof.

Purchase Money Lien : a Lien that secures Purchase Money Debt, encumbering only the fixed assets acquired with such Debt and constituting a Capital Lease or a purchase money security interest under the UCC.

RCRA : the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

Real Estate : all right, title and interest (whether as owner, lessor or lessee) in any real Property or any buildings, structures, parking areas or other improvements thereon.

Refinancing Conditions : the following conditions for Refinancing Debt: (a) it is in an aggregate principal amount that does not exceed the principal amount of the Debt being extended, renewed or refinanced; (b) it has a final maturity no sooner than, a weighted average life no less than, and an interest rate no greater than, the Debt being extended, renewed or refinanced; (c) it is subordinated to the Obligations at least to the same extent as the Debt being extended, renewed or refinanced; (d) the representations, covenants and defaults applicable to it are no less favorable to any Loan Party or Subsidiary, as applicable, than those applicable to the Debt being extended, renewed or refinanced; (e) no additional Lien is granted to secure it; (f) no additional Person is obligated on such Debt; and (g) upon giving effect to it, no Default or Event of Default exists; provided , however , that in the case of clauses (c) , (d) and (e) , if such Refinancing Debt relates to the Lackey Earn-Out, such Refinancing Debt shall not be secured by any Lien.

Refinancing Debt : Borrowed Money that is the result of an extension, renewal or refinancing of Debt permitted under Section 10.2.1(b) , (d), (f) or (i) .

Reimbursement Date : as defined in Section 2.3.2 .

Related Real Estate Documents : with respect to any Real Estate subject to a Mortgage, the following, in form and substance satisfactory to Lender and received by Lender for review at least 15 days prior to the effective date of the Mortgage: (a) a mortgagee title policy (or binder therefor) covering Lender’s interest under the Mortgage, in a form and amount and by an insurer acceptable to Lender, which must be fully paid on such effective date; (b) such assignments of leases, estoppel letters, attornment agreements, consents, waivers and releases as Lender may require with respect to other Persons having an interest in the Real Estate; (c) a current, as-built survey of the Real Estate, containing a metes-and-bounds property description and flood plain certification based on a “Life-of-Loan” search, and certified by a licensed surveyor acceptable to Lender; (d) flood insurance in an amount, with endorsements and by an insurer acceptable to Lender, if the Real Estate is within a flood plain; (e) a current appraisal of the Real Estate, prepared by an appraiser, and in form and substance reasonably satisfactory to Lender; (f) a Phase I environmental site assessment according to ASTM E1527-05, prepared by environmental consultants acceptable to Lender, and accompanied by such reports, studies or data as Lender may reasonably require, which shall all be in form and substance satisfactory to Lender; and (g) an Environmental Agreement and such other documents, instruments or agreements as Lender may reasonably require with respect to any environmental risks regarding the Real Estate.

Rent and Charges Reserve : the aggregate of (a) all past due rent and other amounts owing by an Obligor to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any Collateral; and (b) a reserve at least equal to three months rent and other charges that could be payable to any such Person, unless it has executed a Lien Waiver.

Reportable Event : any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

Reserve Percentage : the reserve percentage (expressed as a decimal, rounded up to the nearest 1/8th of 1%) applicable to member banks under regulations issued from time to time by the Board of Governors for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”).

Restricted Investment : any Investment by any Loan Party or Subsidiary, other than (a) Investments in Subsidiaries to the extent existing on the date hereof; (b) Cash Equivalents that are subject to Lender’s Lien and control, pursuant to documentation in form and substance satisfactory to Lender; (c) Permitted Acquisitions; and (d) loans and advances permitted under Section 10.2.7 .

Restrictive Agreement : an agreement (other than a Loan Document) that conditions or restricts the right of any Loan Party, Subsidiary or other Obligor to incur or repay Borrowed Money, to grant Liens on any assets, to declare or make Distributions, to modify, extend or renew any agreement evidencing Borrowed Money, or to repay any intercompany Debt.

Royalties : all royalties, fees, expense reimbursement and other amounts payable by a Loan Party under a License.

S&P : Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

Secured Parties : Lender and providers of Bank Products.

Security Documents : the Guaranties, Mortgages, Intellectual Property Security Agreements, Insurance Assignments, Deposit Account Control Agreements, and all other documents, instruments and agreements now or hereafter securing (or given with the intent to secure) any Obligations.

Senior Officer : the chairman of the board, president, chief executive officer or chief financial officer of Borrower or, if the context requires, any Loan Party or other Obligor.

Solvent : as to any Person, such Person (a) owns Property whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates. “ Fair salable value ” means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.

Standard Terms Account : any Account arising from the sale of inventory in the ordinary course of business of any Loan Party other than Extended Terms Accounts and Unbilled Accounts.

Subordinated Debt : Debt incurred or assumed by a Loan Party that is expressly subordinate and junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Lender.

Subordination Agreement : that certain Subordination Agreement dated as of the date hereof by and among Robert W. Lackey, as agent for Robert W. Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC, a North Carolina limited liability company, RWL Corporation, a North Carolina corporation, R.L Products Corporation, a Georgia corporation, Lender, Trade Source International, Inc., a Delaware corporation, Prime/Home Impressions, LLC, a North Carolina limited liability company, and Borrower.

Subsidiary : any entity at least 50% of whose voting securities or Equity Interests is owned by a Loan Party or any combination of Loan Parties (including indirect ownership by a Loan Party through other entities in which such Loan Party directly or indirectly owns 50% of the voting securities or Equity Interests). For the avoidance of doubt, Design Trends shall be deemed a Subsidiary for all purposes of this Agreement.

Subsidiary Guarantor : each Subsidiary of Borrower other than (x) a Foreign Subsidiary and (y) CM Real Estate (so long as (i) CM Real Estate engages in no business or activity other than the ownership, operation, leasing and maintenance of the Coppell Facility and activities related thereto and (ii) Borrower remains its sole member).

Taxes : all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

Termination Date : July 10, 2012.

Trade Source : Trade Source International, Inc., a Delaware corporation.

Trigger Period : the period (a) commencing on the day that an Event of Default occurs, or Availability is less than $6,000,000; and (b) continuing until, during the preceding 60 consecutive days, no Event of Default has existed and Availability has been greater than $6,000,000 at all times.

Type : any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same interest option and, in the case of LIBOR Loans, the same Interest Period.

UCC : the Uniform Commercial Code as in effect in the State of Texas or, when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

Unbilled Account : any Account arising from the sale of inventory in the ordinary course of business of any Loan Party that is shipped directly from a manufacturer of such inventory located outside the United States to a customer of a Loan Party, provided that such Loan Party has received electronic notification that such inventory has been loaded “free on board” for shipment to such customer (the date of such notification being the date such Account is generated) which are payable in Dollars and which have not been billed or invoiced by such Loan Party.

Unfunded Pension Liability : the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

Upstream Payment : a Distribution by a wholly-owned Subsidiary of a Loan Party to such Loan Party.

Value : (a) for Inventory, its value determined on the basis of the lower of cost or market, calculated on a first-in, first-out basis, and excluding any portion of cost attributable to intercompany profit among the Loan Parties and their Affiliates; and (b) for an Account, its face amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or Taxes (including sales, excise or other taxes) that have been or could be claimed by the Account Debtor or any other Person.

Wal-Mart : Wal-Mart Stores, Inc., a Delaware corporation, and its Subsidiaries and Affiliates.

Woodard : Woodard—CM, LLC, a Delaware limited liability company.

Woodard Eligible Inventory : Eligible Inventory owned by Woodard.

Woodard Eligible In-Transit Inventory : Eligible In-Transit Inventory owned by Woodard.

Woodard Facility : the Real Estate located in Owosso, Michigan, as described in Schedule 1.1.

1.2. Accounting Terms . Under the Loan Documents (except as otherwise specified herein), all accounting terms shall be interpreted, all accounting determinations shall be made, and all financial statements shall be prepared, in accordance with GAAP applied on a basis consistent with the most recent audited financial statements of Borrower delivered to Lender before the Closing Date and using the same inventory valuation method as used in such financial statements, except for any change required or permitted by GAAP if Borrower’s certified public accountants concur in such change, the change is disclosed to Lender, and Section 10.3 is amended in a manner satisfactory to Lender to take into account the effects of the change.

1.3. Uniform Commercial Code . As used herein, the following terms are defined in accordance with the UCC in effect in the State of Texas from time to time: “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,” “Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.”

1.4. Certain Matters of Construction . The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the computation of periods of time from a specified date to a later specified date, “from” means “from and including,” and “to” and “until” each mean “to but excluding.” The terms “including” and “include” shall mean “including, without limitation” and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision. Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document. All references to (a) laws or statutes include all related rules, regulations, interpretations, amendments and successor provisions; (b) any document, instrument or agreement include any amendments, waivers and other modifications, extensions or renewals (to the extent permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e) any Person include successors and assigns; (f) time of day mean time of day at Lender’s notice address under Section 12.3.1 ; or (g) discretion of Lender mean its sole and absolute discretion. All calculations of Value, fundings of Loans, issuances of Letters of Credit and payments of Obligations shall be in Dollars and, unless the context otherwise requires, all determinations (including calculations of Borrowing Base and financial covenants) made from time to time under the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing Base calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to Lender (and not necessarily calculated in accordance with GAAP). Borrower shall have the burden of establishing any alleged negligence, misconduct or lack of good faith by Lender under any Loan Documents. No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision. Whenever the phrase “to the best of Borrower’s knowledge” or “to the best of any Loan Party’s knowledge” or words of similar import are used in any Loan Documents, it means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter to which such phrase relates.

SECTION 2. CREDIT FACILITIES

2.1. Commitment .

2.1.1. Loans . Lender agrees, on the terms set forth herein, to make Loans to Borrower in an aggregate amount up to the Commitment, from time to time through the Commitment Termination Date. The Loans may be repaid and reborrowed as provided herein. In no event shall Lender have any obligation to honor a request for a Loan if the unpaid balance of Loans outstanding at such time (including the requested Loan) would exceed the Borrowing Base.

2.1.2. Use of Proceeds . The proceeds of Loans shall be used by Borrower solely (a) to satisfy existing Debt; (b) to pay fees and transaction expenses associated with the closing of this credit facility; (c) to pay Obligations in accordance with this Agreement; and (d) for working capital and other lawful corporate purposes of the Loan Parties.

2.1.3. Voluntary Reduction or Termination of Commitment.

(a) The Commitment shall terminate on the Termination Date, unless sooner terminated in accordance with this Agreement. Upon at least 45 days prior written notice to Lender at any time after the first Loan Year, Borrower may, at its option, terminate the Commitment and this credit facility. Any notice of termination given by Borrower shall be irrevocable, provided that a notice of termination of the Commitment delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, the proceeds of which will be used to pay in full the amounts due under the Loan Documents, in which case such notice may be revoked by Borrower (by notice to Lender on or prior to the specified effective date) if such condition is not satisfied. On the Termination Date, Borrower shall make Full Payment of all Obligations.

(b) Borrower may permanently reduce the Commitment upon at least 45 days prior written notice to Lender, which notice shall specify the amount of the reduction and shall be irrevocable once given. Each reduction shall be in a minimum amount of $5,000,000, or an increment of $1,000,000 in excess thereof.

(c) Concurrently with any reduction in or termination of the Commitment, for whatever reason (including an Event of Default) during the first Loan Year, Borrower shall pay to Lender, as liquidated damages for loss of bargain (and not as a penalty), an amount equal to 1.0% of the Commitment being reduced or terminated.

2.1.4. Overadvances . If the aggregate Loans exceed the Borrowing Base (“ Overadvance ”) or the Commitment at any time, the excess amount shall be payable by Borrower on demand by Lender, but all such Loans shall nevertheless constitute Obligations secured by the Collateral and entitled to all benefits of the Loan Documents. Any funding or sufferance of an Overadvance shall not constitute a waiver of the Event of Default caused thereby.

2.2. [Reserved] .

2.3. Letter of Credit Facility .

2.3.1. Issuance of Letters of Credit . Lender agrees to issue Letters of Credit from time to time until 30 days prior to the Termination Date (or until the Commitment Termination Date, if earlier), on the terms set forth herein, including the following:

(a) Borrower acknowledges that Lender’s willingness to issue any Letter of Credit is conditioned upon its receipt of a LC Application with respect to the requested Letter of Credit, as well as such other instruments and agreements as Lender may customarily require for issuance of a letter of credit of similar type and amount. Lender shall have no obligation to issue any Letter of Credit unless (i) it receives a LC Request and LC Application at least three Business Days prior to the requested date of issuance; and (ii) each LC Condition is satisfied.

(b) Letters of Credit may be requested by Borrower only (i) to support obligations of Borrower or any other Loan Party incurred in the Ordinary Course of Business; or (ii) for other purposes as Lender may approve from time to time in writing. The renewal or extension of any Letter of Credit shall be treated as the issuance of a new Letter of Credit, except that delivery of a new LC Application shall be required at the discretion of Lender.

(c) Borrower assumes all risks of the acts, omissions or misuses of any Letter of Credit by the beneficiary. In connection with issuance of any Letter of Credit, Lender shall not be responsible for the existence, character, quality, quantity, condition, packing, value or delivery of any goods purported to be represented by any Documents; any differences or variation in the character, quality, quantity, condition, packing, value or delivery of any goods from that expressed in any Documents; the form, validity, sufficiency, accuracy, genuineness or legal effect of any Documents or of any endorsements thereon; the time, place, manner or order in which shipment of goods is made; partial or incomplete shipment of, or failure to ship, any goods referred to in a Letter of Credit or Documents; any deviation from instructions, delay, default or fraud by any shipper or other Person in connection with any goods, shipment or delivery; any breach of contract between a shipper or vendor and a Loan Party; errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or otherwise; errors in interpretation of technical terms; the misapplication by a beneficiary of any Letter of Credit or the proceeds thereof; or any consequences arising from causes beyond the control of Lender, including any act or omission of a Governmental Authority. Lender shall be fully subrogated to the rights and remedies of each beneficiary whose claims against Loan Parties are discharged with proceeds of any Letter of Credit.

(d) In connection with its administration of and enforcement of rights or remedies under any Letters of Credit or LC Documents, Lender shall be entitled to act, and shall be fully protected in acting, upon any certification, documentation or communication in whatever form believed by Lender, in good faith, to be genuine and correct and to have been signed, sent or made by a proper Person. Lender may consult with and employ legal counsel, accountants and other experts to advise it concerning its obligations, rights and remedies, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon, any advice given by such experts. Lender may employ agents and attorneys-in-fact in connection with any matter relating to Letters of Credit or LC Documents, and shall not be liable for the negligence or misconduct of agents and attorneys-in-fact selected with reasonable care.

2.3.2. Reimbursement . If Lender honors any request for payment under a Letter of Credit, Borrower shall pay to Lender, on the same day (“ Reimbursement Date ”), the amount paid under such Letter of Credit, together with interest at the interest rate for Base Rate Loans from the Reimbursement Date until payment by Borrower. The obligation of Borrower to reimburse Lender for any payment made under a Letter of Credit shall be absolute, unconditional, and irrevocable, and shall be paid without regard to any lack of validity or enforceability of any Letter of Credit or the existence of any claim, setoff, defense or other right that Borrower or any other Loan Party may have at any time against the beneficiary. Whether or not Borrower submits a Notice of Borrowing, Borrower shall be deemed to have requested a Borrowing of Base Rate Loans in an amount necessary to pay all amounts due on any Reimbursement Date.

2.3.3. Cash Collateral . If any LC Obligations, whether or not then due or payable, shall for any reason be outstanding at any time (a) that an Event of Default exists, (b) that Availability is less than zero, (c) after the Commitment Termination Date, or (d) within 20 Business Days prior to the Termination Date, then Borrower shall, at Lender’s request, Cash Collateralize the stated amount of all outstanding Letters of Credit and pay to Lender the amount of all other LC Obligations. If Borrower fails to provide Cash Collateral as required herein, Lender may advance, as Loans, the amount of the Cash Collateral required.

SECTION 3. INTEREST, FEES AND CHARGES

3.1. Interest .

3.1.1. Rates and Payment of Interest.

(a) The Obligations shall bear interest (i) if a Base Rate Loan, at the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if a LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable Margin; and (iii) if any other Obligation (including, to the extent permitted by law, interest not paid when due), at the Base Rate in effect from time to time, plus the Applicable Margin for Base Rate Loans. Interest shall accrue from the date the Loan is advanced or the Obligation is incurred or payable, until paid by Borrower. If a Loan is repaid on the same day made, one day’s interest shall accrue.

(b) During an Insolvency Proceeding with respect to any Loan Party, or during any other Event of Default if Lender in its discretion so elects, Obligations shall bear interest at the Default Rate (whether before or after any judgment). Borrower acknowledges that the cost and expense to Lender due to an Event of Default are difficult to ascertain and that the Default Rate is a fair and reasonable estimate to compensate Lender for this.

(c) Interest accrued on the Loans shall be due and payable in arrears, (i) on the first day of each month; (ii) on any date of prepayment, with respect to the principal amount of Loans being prepaid; (iii) with respect to LIBOR Loans, on the last day of any Interest Period; and (iv) on the Commitment Termination Date. Interest accrued on any other Obligations shall be due and payable as provided in the Loan Documents and, if no payment date is specified, shall be due and payable on demand . Notwithstanding the foregoing, interest accrued at the Default Rate shall be due and payable on demand .

3.1.2. Application of LIBOR to Outstanding Loans.

(a) Borrower may on any Business Day, subject to delivery of a Notice of Conversion/Continuation, elect to convert any portion of the Base Rate Loans to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR Loan. During any Default or Event of Default, Lender may declare that no Loan may be made, converted or continued as a LIBOR Loan.

(b) Whenever Borrower desires to convert or continue Loans as LIBOR Loans, Borrower shall give Lender a Notice of Conversion/Continuation, no later than 11:00 a.m. at least three Business Days before the requested conversion or continuation date. Each Notice of Conversion/Continuation shall be irrevocable, and shall specify the amount of Loans to be converted or continued, the conversion or continuation date (which shall be a Business Day), and the duration of the Interest Period (which shall be deemed to be 30 days if not specified). If, upon the expiration of any Interest Period in respect of any LIBOR Loans, Borrower shall have failed to deliver a Notice of Conversion/Continuation, it shall be deemed to have elected to convert such Loans into Base Rate Loans.

3.1.3. Interest Periods . In connection with the making, conversion or continuation of any LIBOR Loans, Borrower shall select an interest period (“ Interest Period ”) to apply, which interest period shall be 30, 60, or 90 days; provided , however , that:

(a) the Interest Period shall commence on the date the Loan is made or continued as, or converted into, a LIBOR Loan, and shall expire on the numerically corresponding day in the calendar month at its end;

(b) if any Interest Period commences on a day for which there is no corresponding day in the calendar month at its end or if such corresponding day falls after the last Business Day of such month, then the Interest Period shall expire on the last Business Day of such month; and if any Interest Period would expire on a day that is not a Business Day, the period shall expire on the next Business Day; and

(c) no Interest Period shall extend beyond the Termination Date.

3.1.4. Interest Rate Not Ascertainable . If Lender shall determine that on any date for determining LIBOR, due to any circumstance affecting the London interbank market, adequate and fair means do not exist for ascertaining such rate on the basis provided