<PAGE>   1
                                                                    EXHIBIT 10.3


When recorded, return to:

Patrick M. Arnold, Esq.
Fulbright & Jaworski L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201

THE STATE OF TEXAS        Section
                          Section
COUNTY OF DALLAS          Section

                 DEED OF TRUST, MORTGAGE AND SECURITY AGREEMENT

          This Deed of Trust, Mortgage and Security Agreement ("Deed of Trust")
is made by Craftmade International, Inc., a Delaware corporation, having an
office and usual place of business at 650 S. Royal, Coppell, Texas 75019 (the
"Borrower"), to Patrick M. Arnold, as Trustee (the "Trustee"), whose address is
2200 Ross Avenue, Dallas, Texas 75201, for the benefit of Allianz Life
Insurance Company of North America, a Minnesota corporation, whose address is
c/o Allianz Investment Corporation, 55 Greens Farms Road, P.O. Box 5160,
Westport, Connecticut 06881-5160 (the "Lender").

         FOR THE PURPOSE of securing (a) the repayment of the indebtedness
evidenced by the Borrower's promissory note of even date herewith, payable to
the order of the Lender in the original principal amount of Nine Million Two
Hundred Thousand and No/100 Dollars ($9,200,000.00), said principal sum, with
interest thereon at the rate therein provided being finally due and payable on
January 1, 2008, and all renewals, extensions and modifications thereof and any
note issued in substitution therefor (the "Note"); (b) the payment of all other
sums with interest thereon as may be advanced by the Lender in accordance with
this Deed of Trust, the Assignment of Rents and Leases of even date herewith
from the Borrower to the Lender (the "Assignment"), the Environmental Indemnity
of even date herewith from the Borrower to the Lender (the "Indemnity"), and
any other instruments securing payment of the Note (the Note, Deed of Trust,
Assignment, Indemnity and any other instruments securing payment of the Note
being herein together referred to as the "Loan Documents," and the indebtedness
evidenced by the Note and all such other sums being hereinafter collectively
referred to as the "Indebtedness"); and (c) the performance of all the
covenants and agreements of the Borrower contained in the Loan Documents, the
Borrower does hereby mortgage, grant, bargain, sell, assign, transfer and
convey unto the Trustee, for the benefit and security of the Lender, all the
tracts or parcels of land (hereinafter called the "Land"), located in Dallas
County, Texas, and described in Exhibit A attached hereto and made a part
hereof, together with (i) all of the buildings, structures and other
improvements now standing or at any time hereafter constructed or placed upon
the Land; (ii) all lighting, heating, ventilating, air conditioning, sprinkling
and plumbing fixtures, water and power systems, engines and machinery, boilers,
furnaces, oil burners, elevators and motors, communication systems, dynamos,
transformers, electrical equipment and all other fixtures of every description
owned by the Borrower and located in or on, or used, or intended to be used in
connection with the Land or any building now or hereafter located thereon;
(iii) all hereditaments, easements, appurtenances, riparian rights, rents,
issues, profits, insurance






Deed of Trust, Mortgage and Security Agreement - Page 1
<PAGE>   2
proceeds, condemnation awards, mineral rights, water rights, utility rights,
and development rights, now or hereafter belonging or in any way pertaining to
the Land or to any building now or hereafter located thereon and all the
estates, rights and interests of the Borrower in the Land; (iv) all building
materials, furniture, furnishings, maintenance equipment and all other personal
property that is (A) owned by the Borrower, (B) now or hereafter located in, or
on, the Land, and (C) used, or intended to be used, in connection with the
operation of the Land or any building now or hereafter located thereon and all
replacements and additions thereto (it being understood and agreed that in no
event shall this Deed of Trust cover any inventory or receivables of the
Borrower); (v) all rights of the Borrower under any contracts, licenses and
permits relating to the development or operation of the Land, including
specifically, without limitation, any rights of the Borrower arising from
membership in any owners' association relating to the Land or arising from any
restrictive covenants or other covenants running with the Land; (vi) all
additions, accessions, increases, parts, fittings, accessories, replacements,
substitutions, betterments, repairs and proceeds to any and all of the
foregoing (all of the foregoing, together with the Land, being hereinafter
referred to as the "Mortgaged Property"). With respect to any portion of the
Mortgaged Property which constitutes personal property, fixtures or other
property governed by the Texas Uniform Commercial Code, this Deed of Trust
shall constitute a security agreement between the Borrower as the debtor and
the Lender as the secured party, and the Borrower hereby grants the Lender a
security interest in such portion of the Mortgaged Property.

         TO HAVE AND TO HOLD the Mortgaged Property unto Trustee, forever, and
the Borrower does hereby bind itself, its successors, and assigns to WARRANT
AND FOREVER DEFEND the title to the Mortgaged Property unto Trustee against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, subject to the matters (the "Permitted Encumbrances") set forth on
Exhibit B attached hereto and made a part hereof; provided, however, that if
the Borrower shall pay (or cause to be paid) the Indebtedness as and when the
same shall become due and payable and shall fully perform and discharge (or
cause to be fully performed and discharged) all of its obligations set forth in
the Loan Documents on or before the date same are to be performed and
discharged, then the liens, security interests, estates, and rights granted by
the Loan Documents shall terminate, in accordance with the provisions hereof,
otherwise same shall remain in full force and effect.  A certificate or other
written statement executed on behalf of the Trustee or the Lender confirming
that the Indebtedness has not been fully paid or the obligations of the
Borrower set forth in the Loan Documents have not been fully performed or
discharged shall be sufficient evidence thereof for the purpose of reliance by
third parties on such fact.

         The Borrower represents, warrants and covenants to and with the Lender
that it is lawfully seized of the Land in fee simple, subject to the Permitted
Encumbrances, and has good right and full power and authority under all
applicable provisions of law and under its organizational documents to execute
this Deed of Trust and the Loan Documents and to mortgage the Mortgaged
Property; that the Mortgaged Property is free from all liens, security
interests and encumbrances except for the Permitted Encumbrances; and that all
buildings and improvements now or hereafter located on the Land are located
entirely within the boundaries of the Land.  The covenants and warranties of
this paragraph shall survive foreclosure of this Deed of Trust and shall run
with the Land.





Deed of Trust, Mortgage and Security Agreement - Page 2
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         The Borrower further covenants and agrees as follows:

         1.      Payment of the Note.  The Borrower will duly and punctually
pay the principal of and interest on the Note in accordance with the terms of
the Note, and all other Indebtedness, when and as due and payable.  The
provisions of the Note are hereby incorporated by reference into this Deed of
Trust as fully as if set forth at length herein. Time is of the essence hereof.

         2.      Fund for Taxes and Assessments.

         (a)     The Borrower shall pay to the Lender on the day monthly
installments of interest or principal and interest are payable under the Note,
until the Note is paid in full, a sum equal to one-twelfth of the yearly taxes
and assessments levied against the Mortgaged Property as estimated initially
and from time to time by the Lender, to be applied by the Lender to pay said
taxes and assessments (such amounts being hereafter referred to as the
"Funds").  The Lender shall apply the Funds to pay said taxes and assessments
prior to the date that penalty attaches for nonpayment so long as the amount of
Funds held by the Lender is sufficient at that time to make such payments.  No
earnings or interest shall be payable to the Borrower on the Funds.  Such Funds
shall not be, nor be deemed to be, trust funds, and the Lender shall have the
right to hold the Funds in any manner the Lender elects and may commingle the
Funds with other moneys held by the Lender.

         (b)     If the amount of the Funds held by the Lender shall exceed at
any time the amount deemed necessary by the Lender to provide for the payment
of taxes and assessments, such excess shall, at the option of the Lender,
either be promptly repaid to the Borrower or be credited to the Borrower on the
next monthly installment of Funds due.  If at any time the amount of the Funds
held by the Lender shall be less than the amount deemed necessary by the Lender
to pay taxes and assessments as they fall due, the Borrower shall pay to the
Lender any amount necessary to make up the deficiency within ten (10) days
after notice from the Lender to the Borrower requesting payment thereof.  The
Funds are pledged as additional security for the Indebtedness.

         (c)     Upon the occurrence of any Event of Default (as defined in
paragraph 18 hereof) the Lender may apply in any order as the Lender shall
determine in its sole discretion, any Funds held by the Lender at the time of
application to pay taxes and assessments which are then or will thereafter
become due or as a credit against the Indebtedness.  Upon payment in full of
all Indebtedness, the Lender shall promptly refund to the Borrower any Funds
held by the Lender.

         3.      Application of Payments.  All payments received by the Lender
from the Borrower under the Note or the Loan Documents shall be applied by the
Lender in the manner set forth in the Note.

         4.      Payment of Taxes, Assessments and Other Charges.  Subject to
payments in the manner provided under paragraph 2 hereof and to paragraph 9
relating to contests, the Borrower shall pay before a penalty might attach for
nonpayment thereof, all taxes and assessments and all other charges whatsoever
levied upon or assessed or placed against the





Deed of Trust, Mortgage and Security Agreement - Page 3
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Mortgaged Property, except that assessments may be paid in installments so long
as no fine or penalty is added to any installment for the nonpayment thereof.
The Borrower shall likewise pay any and all governmental levies or assessments
such as maintenance charges, owner association dues or charges or fees, levies
or charges resulting from covenants, conditions and restrictions affecting the
Mortgaged Property, which are assessed or imposed upon the Mortgaged Property
or any part thereof or become due and payable, and which create, may create or
appear to create a lien upon the Mortgaged Property, or any part thereof.  The
Borrower shall likewise pay all taxes, assessments and other charges, levied
upon or assessed, placed or made against, or measured by, this Deed of Trust,
or the recordation hereof, or the Indebtedness secured hereby.  In the event of
any legislative action or judicial decision after the date of this Deed of
Trust, imposing upon the Lender the obligation to pay any such taxes,
assessments or other charges, or deducting the amount secured by this Deed of
Trust from the value of the Mortgaged Property for the purpose of taxation, or
changing in any way the laws now in force for the taxation of mortgages, deeds
of trust or debts secured thereby, or the manner of the operation of any such
taxes so as to affect the interests of the Lender, then, and in such event, the
Borrower shall bear and pay the full amount of such taxes, assessments or other
charges.  Notwithstanding the foregoing provisions of this paragraph 4, if for
any reason payment by the Borrower of any such taxes, assessments or other
charges would be unlawful, or if the payment thereof would render the
indebtedness evidenced by the Note usurious, the Lender may declare the whole
sum secured by this Deed of Trust, with interest thereon, to be due and payable
upon thirty (30) days' prior written notice.  The Borrower shall promptly
furnish to the Lender all notices received by the Borrower of amounts due under
this paragraph and in the event the Borrower shall make payment directly, the
Borrower shall promptly furnish to the Lender receipts evidencing such
payments.

         5.      Payment of Utility Charges.  Subject to paragraph 9 relating
to contests, the Borrower shall pay all charges made by utility companies,
whether public or private, for electricity, gas, heat, water, or sewer,
furnished or used in connection with the Mortgaged Property or any part
thereof, and will, upon written request of the Lender, furnish proper receipts
evidencing such payment.

         6.      Liens.  Subject to paragraph 9 hereof relating to contests,
the Borrower shall not create, incur or suffer to exist any lien, encumbrance
or charge on the Mortgaged Property or any part thereof, other than the lien of
this Deed of Trust and any lien described in Exhibit B hereto.  The Borrower
shall pay, when due, the claims of all persons supplying labor or materials to
or in connection with the Mortgaged Property.

         7.      Compliance with Laws.  Subject to paragraph 9 relating to
contests, the Borrower shall comply with all present and future statutes, laws,
rules, orders, regulations and ordinances affecting the Mortgaged Property, any
part thereof or the use thereof.





Deed of Trust, Mortgage and Security Agreement - Page 4
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         8.      Hazardous Substances.

         (a)     Definitions.  As used in this Deed of Trust, the following
terms shall have the following meanings:

                 (i)  "Environmental Law" means the Comprehensive Environmental
         Response, Compensation and Liability Act, 42 U.S.C. Section  9601 et
         seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
         6901 et seq., the Hazardous Materials Transportation Act. 49 U.S.C.
         Section  1802 et seq., the Toxic Substances Control Act, 15 U.S.C.
         Section  2601 et seq., the Federal Water Pollution Control Act, 33
         U.S.C. Section  1251 et seq., the Clean Water Act, 33 U.S.C. Section
         1321 et seq., the Clean Air Act 42 U.S.C. Section  7401 et seq., the
         Texas Water Code, the Texas Solid Waste Disposal Act, the Texas Health
         & Safety Code Section  361.001 et seq., and any other federal, state,
         county, municipal, local or other statute, law, ordinance or
         regulation which may relate to or deal with human health or the
         environment, all as may be from time to time amended.

                 (ii)     "Hazardous Substances" means asbestos
         ureaformaldehyde, polychlorinated biphenyls ("PCBs"), nuclear fuel or
         material, chemical waste, radioactive material, explosives, known
         carcinogens, petroleum products and by-products and other dangerous,
         toxic or hazardous pollutants, contaminants, chemicals, materials or
         substances listed or identified in, or regulated by, any Environmental
         Law.

         (b)     Representations and Warranties.  The Borrower represents and
warrants to the Lender that:

                 (i)      Except as disclosed by the Environmental Reports
         described in subparagraph (d), to the best of the Borrower's knowledge
         there are no Hazardous Substances present in, on or under the
         Mortgaged Property.

                 (ii)     To the best of the Borrower's knowledge, the
         Mortgaged Property is not presently being used and has not in the past
         been used for the handling, storage, transportation, manufacture,
         release or disposal of any Hazardous Substances.

                 (iii)    To the best of the Borrower's knowledge, there are no
         present and have not been any past claims, investigations,
         administrative proceedings, litigation, regulatory hearings or
         requests or demands for remedial or response actions or for
         compensation, which may be proposed, threatened or pending with
         respect to the Mortgaged Property, alleging noncompliance with or
         violation of any Environmental Law, seeking relief under any
         Environmental Law or relating to any required environmental permits,
         licenses or authorizations.

                 (iv)     To the best of the Borrower's knowledge, all reports
         and notices required by any Environmental Law have been duly made with
         respect to the Mortgaged Property, and all permits, licenses and
         authorizations required by any Environmental Law have been obtained
         and are in full force and effect with respect to the Mortgaged
         Property.





Deed of Trust, Mortgage and Security Agreement - Page 5
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                 (v)      Except as disclosed by the Environmental Reports
         described in subparagraph (d), to the best of the Borrower's knowledge
         there is not now present, nor has there ever been present, in, on or
         under the Mortgaged Property any above-ground or underground storage
         tanks used for the storage of petroleum, petroleum by-products or any
         other Hazardous Substances.

                 (vi)     To the best of the Borrower's knowledge, the
         Mortgaged Property is not and never has been listed on the United
         States Environmental Protection Agency's National Priorities List of
         Hazardous Waste Sites or on any other list, schedule, log, inventory
         or record of hazardous waste sites maintained by any federal, state,
         or local agency.

                 (vii)    The Borrower has disclosed and delivered to the
         Lender all environmental reports and investigations which the Borrower
         has obtained or ordered with respect to the Mortgaged Property.

         (c)     Prohibited Uses.  The Borrower shall not use, or permit the
use of, the Mortgaged Property for the handling, storage, transportation,
manufacture, release or disposal of any Hazardous Substances.  In addition, the
Borrower shall not install or maintain, or permit the installation or
maintenance of, any above-ground or underground storage tanks for the storage
of petroleum, petroleum by-products or other Hazardous Substances in, about or
under the Mortgaged Property unless (i) the Borrower has obtained the prior
written consent of the Lender for such installation and maintenance, and (ii)
the Borrower installs and maintains such above-ground or underground storage
tanks in compliance with all applicable Environmental Laws.  Notwithstanding
the foregoing, the Borrower or any tenant of the Borrower may use or store
immaterial amounts of commonly known and used materials which may be deemed
Hazardous Substances hereunder, provided that any such use or storage (A) does
not constitute a remunerative activity of the Borrower or any tenant, (B) is
incidental to the Borrower's or such tenant's primary use of the Mortgaged
Property and does not constitute a primary use thereof, and (C) complies at all
times with all applicable Environmental Laws.

         (d)     Environmental Reports.  The Lender acknowledges receipt from
the Borrower of an Environmental Report dated March 31, 1995, prepared by
Professional Service Industries, Inc., as subsequently supplemented.  Upon the
occurrence of an Event of Default hereunder or if the Lender receives
information which leads the Lender, in its sole discretion, to believe that
except as permitted in paragraph 8(c) above, any Hazardous Substance is present
on or is being handled, stored, transported, manufactured, released or disposed
of in, on or under the Mortgaged Property, the Lender may obtain, at the
Borrower's expense, further environmental reports from a reputable
environmental consultant of the Lender's choice.  If any such environmental
report indicates any presence, handling, storage, transportation, manufacture,
release or disposal of Hazardous Substances in, on or under the Mortgaged
Property, the Lender may require the Borrower, at the Borrower's expense, to
remedy any such presence, handling, storage, transportation, manufacture,
release, or disposal to the satisfaction of the Lender.





Deed of Trust, Mortgage and Security Agreement - Page 6
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         (e)     Legal Proceedings and Remedial Actions.  The Borrower shall
immediately notify the Lender in writing of any claim, investigation,
administrative proceeding, litigation, regulatory hearing or request or demand
for remedial or response action or for compensation which may be proposed,
threatened or pending, alleging the presence, handling, storage,
transportation, manufacture, release or disposal of Hazardous Substances in, on
or under the Mortgaged Property.  The Lender shall have the right, but not the
obligation, to join and participate in any such investigation, administrative
proceeding, litigation, regulatory hearing or other action and to have its
attorneys' fees and expenses in connection therewith paid by the Borrower.
Without the Lender's prior written consent, the Borrower shall not take any
remedial or response action or enter into any settlement or other compromise
with respect to any claim, investigation, administrative proceeding,
litigation, regulatory hearing or request or demand for remedial or response
action or for compensation which, in the Lender's reasonable judgment, may
impair the value of the Lender's security under this Deed of Trust.

         9.      Permitted Contests.  The Borrower shall not be required to (a)
pay any tax, assessment or other charge referred to in paragraph 4 hereof, (b)
pay any charge referred to in paragraph 5 hereof, (c) discharge or remove any
lien, encumbrance or charge referred to in paragraph 6 hereof, or (d) comply
with any statute, law, rule, regulation or ordinance referred to in paragraph 7
hereof, so long as the Borrower shall (i) contest, in good faith, the
existence, amount or the validity thereof, the amount of damages caused thereby
or the extent of its liability therefor, by appropriate proceedings which shall
operate during the pendency thereof to prevent (A) the collection of, or other
realization upon the tax, assessment, charge or lien, encumbrance or charge so
contested, (B) the sale, forfeiture or loss of the Mortgaged Property or any
part thereof, and (C) any interference with the use or occupancy of the
Mortgaged Property or any part thereof, and (ii) shall give such security to
the Lender as may be demanded by the Lender to ensure compliance with the
foregoing provisions of this paragraph 9.  The Borrower shall give prompt
written notice to the Lender of the commencement of any contest referred to in
this paragraph 9.

         10.    Insurance.

         (a)     Risks to be Insured.  The Borrower, at its sole cost and
expense, will maintain insurance of the following character:

                 (i)      Insurance on the buildings and other improvements now
         existing or hereafter erected on the Land and on the fixtures and
         personal property included in the Mortgaged Property against loss by
         fire, and other hazards covered by the so-called "all-risk" form of
         policy without a coinsurance clause in an amount equal to the full
         replacement cost thereof without deduction for physical depreciation,
         which insurance shall in no event be less than the unpaid principal
         balance of the Note at any given time.  While any building or other
         improvement is in the course of being constructed or rebuilt on the
         Land, the Borrower shall provide the aforesaid hazard insurance in
         builder's risk completed value form including coverage available on
         the so-called "all-risk" non-reporting form of policy for an amount
         equal to 100% of the insurable replacement cost of such building or
         other improvement.





Deed of Trust, Mortgage and Security Agreement - Page 7
<PAGE>   8
                 (ii)     If the Mortgaged Property includes steam boilers or
         other equipment for the generation or transmission of steam, insurance
         against loss or damage by explosion, rupture or bursting of steam
         boilers, pipes, turbines, engines and other pressure vessels and
         equipment, in an amount satisfactory to the Lender, without a
         co-insurance clause.

                 (iii)    If the Land or any part thereof is located in a
         designated official flood-hazardous area, flood insurance insuring the
         buildings and improvements now existing or hereafter erected on the
         Land in an amount equal to the lesser of the principal balance of the
         Note or the maximum limit of coverage made available with respect to
         such buildings and improvements under the Federal Flood Disaster
         Protection Act of 1973, as amended, and the regulations issued
         thereunder.

                 (iv)     Comprehensive general liability insurance protecting
         against claims arising from any accident or occurrence in or upon the
         Mortgaged Property in the form and amount acceptable to the Lender.

                 (v)      While any building or improvement is in the course of
         being constructed, renovated or rebuilt on the Land, such worker's
         compensation insurance as is required by statute.

                 (vi)     Insurance against interruption of business in respect
         of the Mortgaged Property in an amount sufficient to pay one (1)
         year's debt service on the Note, including principal and interest
         thereof, tax and assessment payments described in paragraph 2,
         insurance premiums for the coverages required in this paragraph 10,
         and other operating expenses of the Mortgaged Property.

         (b)     Policy Provisions.  All insurance policies and renewals
thereof maintained by the Borrower pursuant to subparagraphs (a)(i) through
(a)(iii) and (a)(vi) above shall be written by an insurance carrier
satisfactory to the Lender, contain a standard mortgagee clause in favor of and
in form acceptable to the Lender, contain an agreement of the insurer that it
will not cancel or modify the policy except after thirty (30) days prior
written notice to the Lender, and be reasonably satisfactory to the Lender in
all other respects.  The insurance maintained pursuant to subparagraph (a)(iv)
and (a)(v) shall also be written by an insurance carrier acceptable to the
Lender and shall name the Lender as an additional insured.

         (c)     Delivery of Policy.  The Borrower will deliver to the Lender
copies of policies satisfactory to the Lender evidencing the insurance which is
required under subparagraphs (a)(i) through (a)(iii) and (a)(vi), certificates
evidencing the insurance which is required under subparagraphs (a)(iv) and
(a)(v), and the Borrower shall promptly furnish to the Lender copies of all
renewal notices and all receipts of paid premiums received by it.  At least
fifteen (15) days prior to the expiration date of a required policy, the
Borrower shall deliver to the Lender a copy of a renewal policy in form
satisfactory to the Lender.  If the Borrower has a blanket insurance policy in
force providing coverage for several properties of the Borrower, including the
Mortgaged Property, the Lender will accept a certificate of such insurance
together with a copy of such blanket insurance policy; provided the certificate
sets forth the amounts of insurance and coverage, and such amounts are at least
equal to the amounts





Deed of Trust, Mortgage and Security Agreement - Page 8
<PAGE>   9
required hereinabove, the original policy of insurance is written by a carrier
or carriers acceptable to the Lender, insures against the risks set forth
hereinabove, cannot be amended, modified or canceled without thirty (30) days'
prior written notice to any mortgagee of the Borrower, is in an amount not less
than the unpaid principal balance secured by this Deed of Trust, and has a full
replacement cost endorsement meeting the requirements of paragraph 10(a)(i).

         (d)     Assignment of Policy.  If the Mortgaged Property is sold at a
foreclosure sale or if the Lender shall acquire title to the Mortgaged
Property, the Lender shall have all of the right, title and interest of the
Borrower in and to any insurance policies required under subparagraphs 10(a)(i)
through (a)(iii) and (a)(vi) hereof and the unearned premiums thereon and in
and to the proceeds resulting from any damage to the Mortgaged Property prior
to such sale or acquisition.

         (e)     Notice of Damage or Destruction; Adjusting Loss.  If the
Mortgaged Property or any part thereof shall be damaged or destroyed by fire or
other casualty, the Borrower will promptly give written notice thereof to the
insurance carrier and the Lender, and will not adjust any damage or loss unless
the Lender shall have joined in such adjustment; but if there has been no
adjustment of any such damage or loss within four months from the date of
occurrence thereof and if an Event of Default shall exist at the end of such
four-month period or at any time thereafter, the Lender may alone, make proof
of loss, adjust and compromise any claim under the policies and appear in and
prosecute any action arising from such policies.  In connection therewith, the
Borrower does hereby irrevocably authorize, empower and appoint the Lender as
attorney-in-fact for the Borrower (which appointment is coupled with an
interest and is irrevocable) to do any and all of the foregoing in the name and
on behalf of the Borrower.

         (f)     Application of Insurance Proceeds.  All sums paid under any
insurance policy required in subparagraphs 10(a)(i) through (a)(iii) and
(a)(vi), shall be paid to the Lender. Lender agrees to allow the use of sums
paid under the insurance policy required under subparagraph (a) above for
repair and reconstruction of the Mortgaged Property provided that, in the
Lender's sole and subjective judgment, (i) restoration or repair of the
Mortgaged Property is economically feasible, (ii) the value of the Lender's
security is not reduced, (iii) no lease has terminated as a result of the loss
or damage and all leases remain enforceable under their terms without
modification, (iv) the loss does not occur in the six month period preceding
the stated maturity date of the Note and Lender's independent consultant
certifies that the restoration of the Mortgaged Property can be completed at
least ninety days prior to the maturity date of the Note, (v) there exists no
Event of Default or other event which with the passing of time or the giving of
notice or both would constitute an Event of Default under the Note or this Deed
of Trust, (vi) insurance proceeds and additional funds deposited by the
Borrower with the Lender prior to the commencement of any repair or
reconstruction are adequate to complete repair and reconstruction of the
Mortgaged Property pursuant to plans and specifications approved by Lender,
(vii) disbursement procedures acceptable to Lender are in place, which
procedures shall include provisions for the deposit of construction shortfalls,
collection of lien waivers, issuance of title policies by a title insurance
company, payment of Lender's fees and expenses in disbursing, and coordination
of work, and Borrower shall have reimbursed Lender for all of its reasonable
out-of-pocket expenses in connection





Deed of Trust, Mortgage and Security Agreement - Page 9
<PAGE>   10
with such reconstruction and disbursement, including, without limitation, title
insurance fees, inspection fees, attorneys' fees, and architect's fees, and
(ix) Lender shall have received such consents and assurances from municipal
authorities, tenants in the Mortgaged Property and others as Lender may
request, including, without limitation, assurances from the tenants that they
will continue as tenants in the Mortgaged Property upon completion of the
repair or reconstruction work, that the leases remain in full force and effect
on substantially the same terms as before the occurrence of the damage
necessitating the repair or reconstruction work, that there are no unsatisfied
claims against the Borrower, and that the tenants are obligated to pay rent
without credit, offset or deduction, and that to the best of their knowledge,
there exists no default or state of facts which, with notice and/or the passage
of time, would constitute a default under any lease on the part of the
Borrower.  Lender may establish other conditions it deems necessary to assure
the work is fully completed in a good and workmanlike manner free of all liens
or claims by reason thereof, and in compliance with all applicable laws, rules
and regulations. If the above conditions are not satisfied as to application of
insurance proceeds, and in any event as to condemnation awards, Lender shall
apply the same (after first deducting therefrom Lender's reasonable expenses
incurred in collecting the same, including but not limited to reasonable
attorneys' fees) to the reduction of the outstanding principal balance of the
Loan without a prepayment premium or to payment of the restoration, repair,
replacement or rebuilding of the property that is damaged or destroyed in such
manner as Lender may determine.  Any application of insurance proceeds or
eminent domain proceeds shall not extend or postpone the due dates of the
monthly installments payable under the Note or change the amount of such
installments.

         (g)     Reimbursement of the Lender's Expenses.  The Borrower shall
promptly reimburse the Lender upon demand for all of the Lender's expenses
incurred in connection with the collection of the insurance proceeds, including
but not limited to reasonable attorneys' fees, and all such expenses, together
with interest from the date of disbursement at the rate stated in the Note
(unless collection of interest from the Borrower at such rate would be contrary
to applicable law, in which event such amounts shall bear interest at the
highest rate which may be collected from the Borrower under applicable law)
shall be additional amounts secured by this Deed of Trust.

         11.     Preservation and Maintenance of the Mortgaged Property.  The
Borrower (a) shall keep the buildings and other improvements now or hereafter
erected on the Land in safe and good repair and condition, ordinary
depreciation excepted; (b) shall, upon damage to or destruction of the
Mortgaged Property or any part thereof by fire or other casualty, restore,
repair, replace or rebuild the Mortgaged Property that is damaged or destroyed
to the condition it was in immediately prior to such damage or destruction,
whether or not any insurance proceeds are available or sufficient for such
purpose, unless the Lender shall have elected to apply such proceeds to
reduction of the Indebtedness; (c) shall constantly maintain the parking and
landscaped areas of the Mortgaged Property; (d) shall not commit waste or
permit impairment or deterioration of the Mortgaged Property; (e) shall not
remove from the Land any of the fixtures and personal property included in the
Mortgaged Property unless the same is immediately replaced with property of at
least equal value and utility, and this Deed of Trust becomes a valid first
lien on such property.





Deed of Trust, Mortgage and Security Agreement - Page 10
<PAGE>   11
         12.     Inspection.  The Lender, or its agents, shall have the right
at all reasonable times, and only after reasonable prior notice to Borrower
except in the case of emergency, to enter upon the Mortgaged Property for the
purposes of inspecting the Mortgaged Property or any part thereof.  The Lender
shall, however, have no duty to make such inspection.

         13.     Protection of the Lender's Security.  Subject to the rights of
the Borrower under paragraph 9 hereof, if the Borrower fails to perform any of
the covenants and agreements contained in the Loan Documents or if any action
or proceeding is commenced which affects the Mortgaged Property or the interest
of the Lender therein, or the title thereto, then the Lender, at Lender's
option, may perform such covenants and agreements, defend against and/or
investigate such action or proceeding, and take such other action as the Lender
deems necessary to protect the Lender's interest.  The Lender shall be the sole
judge of the legality, validity and priority of any claim, lien, encumbrance,
tax, assessment, charge and premium paid by it and of the amount necessary to
be paid in satisfaction thereof.  Upon the occurrence of an Event of Default,
the Lender is hereby given the irrevocable power of attorney (which power is
coupled with an interest and is irrevocable) to enter upon the Mortgaged
Property as the Borrower's agent in the Borrower's name to perform any and all
covenants and agreements to be performed by the Borrower as herein provided.
Any amounts or expenses disbursed or incurred by the Lender pursuant to this
paragraph 13, with interest thereon, shall become additional Indebtedness of
the Borrower secured by this Deed of Trust.  Unless the Borrower and the Lender
agree in writing to other terms of repayment, such amounts shall be immediately
due and payable, and shall bear interest from the date of disbursement at the
interest rate stated in the Note, unless collection from the Borrower of
interest at such rate would be contrary to applicable law, in which event such
amounts shall bear interest at the highest rate which may be collected from the
Borrower under applicable law.  The Lender shall, at its option, be subrogated
to the lien of any mortgage or other lien discharged in whole or in part by the
Indebtedness or by the Lender under the provisions hereof, and any such
subrogation rights shall be additional and cumulative security for this Deed of
Trust.  Nothing contained in this paragraph 13 shall require the Lender to
incur any expense or do any act hereunder, and the Lender shall not be liable
to the Borrower for any damages or claims arising out of action taken by the
Lender pursuant to this paragraph 13.

         14.     Condemnation.  The Borrower hereby irrevocably assigns to the
Lender any award or payment which becomes payable by reason of any taking of
the Mortgaged Property, or any part thereof, whether directly or indirectly or
temporarily or permanently, in or by condemnation or other eminent domain
proceedings (hereinafter called "Taking").  Forthwith upon receipt by the
Borrower of notice of the institution of any proceeding or negotiations for a
Taking, the Borrower shall give notice thereof to the Lender.  The Lender may
appear in any such proceedings and participate in any such negotiations and may
be represented by counsel.  The Borrower, notwithstanding that the Lender may
not be a party to any such proceeding, will promptly give to the Lender copies
of all notices, pleadings, judgments, determinations and other papers received
by the Borrower therein.  The Borrower will not enter into any agreement
permitting or consenting to the taking of the Mortgaged Property, or any part
thereof, or providing for the conveyance thereof in lieu of condemnation, with
anyone authorized to acquire the same in condemnation or by eminent domain
unless the Lender shall first have consented thereto in writing.  All Taking
awards shall be adjusted jointly by the Borrower and the Lender.  In the event
that the conditions set forth in clauses





Deed of Trust, Mortgage and Security Agreement - Page 11
<PAGE>   12
(i) through (ix) of paragraph 10(f) are satisfied, Lender agrees to allow the
use of sums paid as a result of a Taking (after first deducting therefrom
Lender's reasonable expenses incurred in collecting the same, including but not
limited to reasonable attorneys' fees) for repair or restoration of the
Mortgaged Property in the manner as provided in paragraph 10(f) relating to the
application of insurance proceeds.  If the conditions set forth in paragraph
10(f) are not satisfied, Lender may apply proceeds of the Taking (after
deduction of Lender's reasonable expenses as aforesaid) to the reduction of the
outstanding principal balance of the Loan without a prepayment premium, or to
payment of the repair or restoration of the Mortgaged Property in such manner
as Lender may determine.  Any application of Taking awards to principal of the
Note shall not extend or postpone the due dates of the monthly installments
payable under the Note or change the amount of such installments.

         If the Taking involves a taking of any building or other improvement
now or hereafter located on the Land, the Borrower shall proceed, with
reasonable diligence, to demolish and remove any ruins and complete repair or
restoration of the Mortgaged Property as nearly as possible to its respective
size, type and character immediately prior to the Taking, whether or not the
condemnation awards are available or adequate to complete such repair or
restoration unless the Lender has applied the entire condemnation award to
payment of the Indebtedness (without prepayment premium).  The Borrower shall
promptly reimburse the Lender upon demand for all of the Lender's expenses
(including reasonable attorneys' fees) incurred in the collection of awards and
their disbursement in accordance with this paragraph, and all such expenses,
together with interest from the date of disbursement at the rate stated in the
Note (unless collection of interest from the Borrower at such rate would be
contrary to applicable law, in which event such amounts shall bear interest at
the highest rate which may be collected from the Borrower under applicable law)
shall be additional amounts secured by this Deed of Trust.

         15.     Financial Covenants, Statements and Other Information; Books
and Records.

         (a)     Status of Borrower.  Borrower is and, unless changed as
provided below, will continue to be a corporation duly organized and validly
existing under the laws of the State of Delaware and in good standing and
qualified to do business in the State of Texas.  Borrower may not change its
form of organization or state of organization without the prior written consent
of Lender, which consent will not be withheld unless the proposed change will
have a material adverse effect on the rights of Lender under the Loan
Documents.

         (b)     Financial Reports as to Borrower. Borrower will deliver to
Lender within ninety (90) days after the end of each Fiscal Year of Borrower
financial statements that cover the last Fiscal Year of Borrower prepared by
independent certified public accountants of recognized national standing in
accordance with generally accepted accounting principles. If an Event of
Default occurs, Borrower will deliver to Lender upon demand year-to-date
financial statements prepared by independent certified public accountants of
recognized national standing in accordance with generally accepted accounting
principles.





Deed of Trust, Mortgage and Security Agreement - Page 12
<PAGE>   13
         (c)     Financial Reports as to the Mortgaged Property.  The Borrower
will prepare or cause to be prepared at its expense and deliver to the Lender
for the Mortgaged Property (in such number as may reasonably be requested):

                 (i)      As soon as practicable after the end of each calendar
         year, and in no event later than ninety (90) days thereafter, a
         separate unaudited statement of the income from and expenses incurred
         with respect to the Mortgaged Property for such year, including a
         balance sheet, an operating/financial statement and a current tenant
         summary, setting forth in comparative form the figures for the
         previous calendar year, all in reasonable detail and certified to be
         true and correct by the Borrower.  The tenant summary shall include
         tenants' names, square footage, lease commencement and expiration
         dates, base rent and other charges, security deposits, options and
         other lease concessions, delinquencies, unleased space, vacant space
         and, with respect to leases that have expired within the year or will
         expire in the next year, the new or proposed lease terms for such
         leases that have been renewed (a "Leasing Summary").

                 (ii)     As soon as practicable after the occurrence of an
         Event of Default, and in no event later than thirty (30) days
         thereafter, and monthly thereafter until such time as there is not in
         existence an uncured Event of Default, a Leasing Summary and an
         unaudited statement of the income from and expenses incurred with
         respect to the Mortgaged Property for each month and the year to date,
         setting forth in comparative form the figures for the previous
         calendar year, all in reasonable detail and prepared and certified to
         be true and correct by Borrower.

                 (iii)    Immediately upon becoming aware of the existence of
         any condition or event which constitutes, or which after notice or
         lapse of time or both would constitute, an Event of Default, written
         notice specifying the nature and period of existence thereof and what
         action the Borrower has taken, is taking or proposes to take with
         respect thereto.

         (d)     Books and Records. Borrower shall keep and maintain at all
times at the Borrower's address stated below or at such other place as the
Lender may approve in writing, complete and accurate books of accounts and
records in sufficient detail to reflect correctly the results of the operation
of the Mortgaged Property and copies of all written contracts, leases and other
instruments which affect the Mortgaged Property.  Such books, records,
contracts, leases and other instruments shall be subject to examination and
inspection by the Lender or its representative during ordinary business hours.
If the Borrower fails to provide the operating statements specified in
subparagraph (c) above, the Lender shall have the right to audit the Borrower's
books and records at the Borrower's expense.

         16.     No Secondary Financing. The Borrower shall not create or
permit to be created or to remain any subordinate lien on the Mortgaged
Property or any part thereof.

         17.     Security Interest.  This Deed of Trust shall constitute a
security agreement with respect to (and the Borrower hereby grants the Lender a
security interest in) all personal property and fixtures included in the
Mortgaged Property as more specifically described in paragraphs (ii), (iv) and
(v) of the granting clause above.  The Borrower will from





Deed of Trust, Mortgage and Security Agreement - Page 13
<PAGE>   14
time to time, at the request of the Lender, execute any and all financing
statements covering such personal property and fixtures (in a form satisfactory
to the Lender) which the Lender may reasonably consider necessary or
appropriate to perfect its security interest.

         18.     Events of Default; Acceleration.  Each of the following
occurrences shall constitute an event of default hereunder (herein called an
"Event of Default"):

         (a)     The Borrower shall fail to make due and punctual payment of
any installment of interest or principal (or both) or any other payment
becoming due under the Note.

         (b)     The Borrower shall fail to make due and punctual payment of
any other amounts (not described in the foregoing paragraph 18(a) or paragraph
18(e) below) required to be paid under this Deed of Trust or any of the other
Loan Documents (excluding the Note, to which paragraph 18(a) applies) within
ten (10) days after the date upon which such amount becomes due.

         (c)     The Borrower shall default in the performance of or breach its
agreement contained in paragraph 16 hereof.

         (d)     The Borrower shall fail to duly and punctually pay when and as
due any payment for taxes and assessments required by paragraph 2 to be paid
(subject to paragraph 9 hereof relating to contests) or shall fail to provide
the insurance coverage required by paragraph 10(a).

         (e)     The Borrower shall fail duly to perform or observe any of the
covenants or agreements contained in the Loan Documents (other than a covenant
or agreement which is specifically dealt with elsewhere in this paragraph 18)
and such failure shall not be cured within thirty (30) days after written
notice to Borrower (or longer if reasonably necessary and Borrower is
proceeding diligently to cure such failure).

         (f)     The Borrower shall make an assignment for the benefit of its
creditors, or the Borrower shall generally not be paying its debts as they
become due, or a petition shall be filed by or against the Borrower under the
United States Bankruptcy Code, or the Borrower shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of a
material part of its properties or of the Mortgaged Property or any part
thereof or shall not, within thirty (30) days after the appointment (without
its consent or acquiescence) of a trustee, receiver or liquidator of any
material part of its properties or of the Mortgaged Property, have such
appointment vacated.

         (g)     A judgment, writ or warrant of attachment or execution, or
similar process shall be entered and become a lien on, issued or levied
against, the Mortgaged Property or any part thereof and shall not be released,
vacated or fully bonded within thirty (30) days after its entry, issue or levy.

         (h)     Except as provided in this subparagraph, the Mortgaged
Property, or any part thereof, without the prior written consent of Lender,
shall be sold, conveyed, transferred, encumbered or full possessory rights
therein transferred, or the controlling interest in the





Deed of Trust, Mortgage and Security Agreement - Page 14
<PAGE>   15
Borrower shall be sold, conveyed, transferred or encumbered, whether
voluntarily, involuntarily or by operation of law; and this provision shall
apply to each and every sale, transfer, conveyance or encumbrance regardless of
whether or not the Lender has consented or waived its rights, whether by action
or omission, in connection with any previous sale, transfer, conveyance or
encumbrance.  Notwithstanding the preceding sentence, however, Borrower shall
have a one-time right to transfer the Mortgaged Property subject to the prior
written consent of Lender (which consent may be given or withheld in Lender's
sole discretion) provided that the transferee (i) assumes and agrees to perform
all of the obligations of Borrower under the Loan Documents, (ii) pays to
Lender a fee equal to one percent (1%) of the principal balance of the Loan,
(iii) pays all of the costs and expenses of Lender (including reasonable
attorneys' fees) incurred in connection with the transfer, and (iv) complies
with all other reasonable requirements of Lender in connection with the
transfer.  The consent of Lender to this one-time transfer shall be based on
its review of the transferee (form of entity, credit history, financial
strength, net worth, liquidity, equity investment such as down payment, etc.),
terms of transfer, and the evaluation of the then current tenancies and the
then financial and physical status of the Mortgaged Property; all of which
shall be equivalent to or better than these conditions existing on the date of
this Deed of Trust.  In the event of any such transfer, Borrower shall remain
liable for all of its obligations under the Note, this Deed of Trust and the
other Loan Documents.

         (i)     Any representation or warranty made by Borrower or any
shareholder of Borrower to Lender in connection with the loan secured hereby
proves to be untrue in any material respect.

         Upon the occurrence of any Event of Default, Lender may, at its
option, declare the principal of and the accrued interest on the Note, and all
sums advanced hereunder, with interest thereon, to be forthwith due and
payable, and thereupon the Note and all other Indebtedness secured hereby,
including both principal and all unpaid interest accrued thereon, including all
applicable late payment charges and prepayment premium, and including all sums
advanced hereunder and interest thereon, shall be and become immediately due
and payable without presentment, demand or notice of any kind.  Time is of the
essence hereof.

         19.     Remedies.  Upon the occurrence of any Event of Default, then
and in every such case the Lender may, at the Lender's option, and by or
through Trustee, by the Lender itself or otherwise, do any one or more of the
following, in addition to any other remedies available to the Lender:

         (a)  the Lender may, prior or subsequent to the institution of any
foreclosure proceedings, enter upon the Mortgaged Property, or any part
thereof, and take exclusive possession of the Mortgaged Property and of all
books, records, and accounts relating thereto and exercise without interference
from the Borrower any and all rights which the Borrower has with respect to the
management, possession, operation, protection, or preservation of the Mortgaged
Property, including without limitation, the right to rent the same for the
account of the Borrower and to deduct from such Rents all costs, expenses, and
liabilities of every character incurred by the Lender in collecting such Rents
and in managing, operating, maintaining, protecting, or preserving the
Mortgaged Property and to apply the remainder





Deed of Trust, Mortgage and Security Agreement - Page 15
<PAGE>   16
of such Rents on the Indebtedness in such manner as the Lender may elect.  All
such costs, expenses, and liabilities incurred by the Lender in collecting such
Rents and in managing, operating, maintaining, protecting, or preserving the
Mortgaged Property, if not paid out of Rents as hereinabove provided, shall
constitute a demand obligation owing by the Borrower and shall bear interest
from the date of expenditure until paid at the Default Rate, all of which shall
constitute a portion of the Indebtedness.  If necessary to obtain the
possession provided for above, the Lender may invoke any and all legal remedies
to dispossess the Borrower, including specifically one or more actions for
forcible entry and detainer, trespass to try title, and restitution.  In
connection with any action taken by the Lender pursuant to this subsection, the
Lender shall not be liable for any loss sustained by the Borrower resulting
from any failure to let the Mortgaged Property, or any part thereof, or from
any other act or omission of the Lender in managing the Mortgaged Property
unless such loss is caused by the willful misconduct of the Lender, nor shall
the Lender be obligated to perform or discharge any obligation, duty, or
liability under any lease or under or by reason hereof or the exercise of
rights or remedies hereunder.  THE BORROWER SHALL AND DOES HEREBY AGREE TO
INDEMNIFY THE LENDER FOR, AND TO HOLD THE LENDER HARMLESS FROM, ANY AND ALL
LIABILITY, LOSS, OR DAMAGE (INCLUDING, WITHOUT LIMITATION, ANY LIABILITY, LOSS
OR DAMAGE ARISING FROM, OR ALLEGED TO HAVE ARISEN FROM, THE SOLE OR CONCURRENT
NEGLIGENCE OF LENDER) WHICH MAY OR MIGHT BE INCURRED BY THE LENDER UNDER ANY
SUCH LEASE OR UNDER OR BY REASON HEREOF OR THE EXERCISE OF RIGHTS OR REMEDIES
HEREUNDER, AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, CLAIMS AND DEMANDS ARISING FROM, OR ALLEGED TO HAVE ARISEN
FROM, THE SOLE OR CONCURRENT NEGLIGENCE OF LENDER) WHICH MAY BE ASSERTED
AGAINST THE LENDER BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS
PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS, OR AGREEMENTS
CONTAINED IN ANY SUCH LEASE.  Should the Lender incur any such liability, the
amount thereof, including without limitation, costs, expenses, and reasonable
attorneys' fees, together with interest thereon from the date of expenditure
until paid at the Default Rate, shall be secured hereby, and the Borrower shall
reimburse the Lender therefor immediately upon demand.  Nothing in this
subsection shall impose any duty, obligation, or responsibility upon the Lender
for the control, care, management, leasing, or repair of the Mortgaged
Property, nor for the carrying out of any of the terms and conditions of any
such Lease; nor shall it operate to make the Lender responsible or liable for
any waste committed on the Mortgaged Property by the tenants or by any other
parties, or for any Hazardous Substance on or under the Mortgaged Property, or
for any dangerous or defective condition of the Mortgaged Property or for any
negligence in the management, leasing, upkeep, repair, or control of the
Mortgaged Property resulting in loss or injury or death to any tenant,
licensee, employee, or stranger.  The Borrower hereby assents to, ratifies, and
confirms any and all actions of the Lender with respect to the Mortgaged
Property taken under this subsection.

         (b)     The Lender may request the Trustee to proceed with foreclosure
under the power of sale which is hereby conferred, such foreclosure to be
accomplished in accordance with the following provisions:





Deed of Trust, Mortgage and Security Agreement - Page 16
<PAGE>   17
                 (i)      The Trustee is hereby authorized and empowered, and
         it shall be the Trustee's special duty, upon such request of Lender,
         to sell the Mortgaged Property, or any part thereof, at public auction
         to the highest bidder for cash, with or without having taken
         possession of same.  Any such sale (including notice thereof) shall
         comply with the applicable requirements, at the time of the sale, of
         Section 51.002 of the Texas Property Code, as amended, or, if and to
         the extent such statute is not then in force, with the applicable
         requirements, at the time of the sale, of the successor statute or
         statutes, if any, governing sales of Texas real property under powers
         of sale conferred by deeds of trust.  If there is no statute in force
         at the time of the sale governing sales of Texas real property under
         powers of sale conferred by deeds of trust, such sale shall comply
         with applicable law at the time of the sale.

                 (ii)     At any time during the bidding, the Trustee may
         require a bidding party (A) to disclose its full name, state and city
         of residence, occupation, and specific business office location, and
         the name and address of the principal the bidding party is
         representing (if applicable), and (B) to demonstrate reasonable
         evidence of the bidding party's financial ability (or, if applicable,
         the financial ability of the principal of such bidding party), as a
         condition to the bidding party submitting bids at the foreclosure
         sale.  If any such bidding party (the "Questioned Bidder") declines to
         comply with the Trustee's requirement in this regard, or if such
         Questioned Bidder does respond but the Trustee, in Trustee's sole and
         absolute discretion, deems the information or the evidence of the
         financial ability of the Questioned Bidder (or, if applicable, the
         principal of such bidding party) to be inadequate, then the Trustee
         may continue the bidding with reservation; and in such event (1) the
         Trustee shall be authorized to caution the Questioned Bidder
         concerning the legal obligations to be incurred in submitting bids,
         and (2) if the Questioned Bidder is not the highest bidder at the
         sale, or if having been the highest bidder the Questioned Bidder fails
         to deliver the cash purchase price payment promptly to the Trustee,
         all bids by the Questioned Bidder shall be null and void.  The Trustee
         may, in Trustee's sole and absolute discretion, determine that a
         credit bid may be in the best interest of the Borrower and the Lender,
         and elect to sell the Mortgaged Property for credit or for a
         combination of cash and credit; provided, however, that the Trustee
         shall have no obligation to accept any bid except an all cash bid.  In
         the event the Trustee requires a cash bid and cash is not delivered
         within a reasonable time after conclusion of the bidding process, as
         specified by the Trustee, but in no event later than 3:45 p.m. local
         time on the day of sale, then said contingent sale shall be null and
         void, the bidding process may be recommenced, and any subsequent bids
         or sale shall be made as if no prior bids were made or accepted.

                 (iii)    In addition to the rights and powers of sale granted
         under the preceding provisions of this subsection, if default is made
         in the payment of any installment of the Indebtedness, Lender may, at
         Lender's option, at once or at any time thereafter while any matured
         installment remains unpaid, without declaring the entire Indebtedness
         to be due and payable, orally or in writing direct the Trustee to
         enforce this trust and to sell the Mortgaged Property subject to such
         unmatured Indebtedness and to the rights, powers, liens, security
         interests, and assignments securing or providing recourse for payment
         of such unmatured Indebtedness, in the same manner,





Deed of Trust, Mortgage and Security Agreement - Page 17
<PAGE>   18
         all as provided in the preceding provisions of this subsection.  Sales
         made without maturing the Indebtedness may be made hereunder whenever
         there is a default in the payment of any installment of the
         Indebtedness, without exhausting the power of sale granted hereby, and
         without affecting in any way the power of sale granted under this
         subsection, the unmatured balance of the Indebtedness or the rights,
         powers, liens, security interests, and assignments securing or
         providing recourse for payment of the Indebtedness.

                 (iv)     Sale of a part of the Mortgaged Property shall not
         exhaust the power of sale, but sales may be made from time to time
         until the Indebtedness is paid and the obligations of Borrower set
         forth in the Loan Documents are performed and discharged in full.  It
         is intended by each of the foregoing provisions of this subsection
         that the Trustee may, after any request or direction by Lender, sell
         the Mortgaged Property as a unit or sell at any time or from time to
         time any part or parts of the Mortgaged Property separately from the
         remainder of the Mortgaged Property.  It shall not be necessary to
         have present or to exhibit at any sale any of the Mortgaged Property.

                 (v)      After any sale under this subsection, the Trustee
         shall make good and sufficient deeds, assignments, and other
         conveyances to the purchaser or purchasers thereunder in the name of
         the Borrower, conveying the Mortgaged Property or any part thereof so
         sold to the purchaser or purchasers with general warranty of title by
         the Borrower.  It is agreed that in any deeds, assignments or other
         conveyances given by the Trustee, any and all statements of fact or
         other recitals therein made as to the identity of Lender, the
         occurrence or existence of any Event of Default, the notice of
         intention to accelerate, or acceleration of, the maturity of the
         Indebtedness, the request to sell, notice of sale, time, place, terms
         and manner of sale, and receipt, distribution, and application of the
         money realized therefrom, the due and proper appointment of a
         substitute trustee, and without being limited by the foregoing, any
         other act or thing having been duly done by or on behalf of Lender or
         by or on behalf of Trustee, shall be taken by all courts of law and
         equity as prima facie evidence that such statements or recitals state
         true, correct, and complete facts and are without further question to
         be so accepted, and the Borrower does hereby ratify and confirm any
         and all acts that Trustee may lawfully do in the premises by virtue
         hereof.

         (c)     The Lender, or the Trustee, upon written request of the
Lender, may proceed by suit or suits, at law or in equity, to enforce the
payment of the Indebtedness and the performance and discharge of the
obligations of Borrower set forth in the Loan Documents in accordance with the
terms hereof, of the Note, and the other Loan Documents, to foreclose the liens
and security interests of this Deed of Trust as against all or any part of the
Mortgaged Property, and to have all or any part of the Mortgaged Property sold
under the judgment or decree of a court of competent jurisdiction.  This remedy
shall be cumulative of any other nonjudicial remedies available to the Lender
with respect to the Loan Documents.  Proceeding with a request or receiving a
judgment for legal relief shall not be or be deemed to be an election of
remedies or bar any available nonjudicial remedy of the Lender.





Deed of Trust, Mortgage and Security Agreement - Page 18
<PAGE>   19
         (d)     The Lender may be the purchaser of the Mortgaged Property or
any part thereof, at any sale thereof, whether such sale be under the power of
sale herein vested in the Trustee or upon any other foreclosure of the liens
and security interests hereof, or otherwise, and the Lender shall, upon any
such purchase, acquire good title to the Mortgaged Property so purchased, free
of the liens and security interests hereof, unless the sale was made subject to
an unmatured portion of the Indebtedness.  The Lender, as purchaser, shall be
treated in the same manner as any third party purchaser and the proceeds of the
Lender's purchase shall be applied in accordance with subparagraph (h) below.

         (e)     Should any part of the Mortgaged Property come into the
possession of the Lender, whether before or after default, the Lender may (for
itself or by or through other persons, firms, or entities) hold, lease, manage,
use, or operate the Mortgaged Property for such time and upon such terms as the
Lender may deem prudent under the circumstances (making such repairs,
alterations, additions, and improvements thereto and taking such other action
as the Lender may from time to time deem necessary or desirable) for the
purpose of preserving the Mortgaged Property or its value, pursuant to the
order of a court of appropriate jurisdiction or in accordance with any other
rights held by the Lender in respect of the Mortgaged Property.  The Borrower
covenants to promptly reimburse and pay to the Lender on demand, at the place
where the Note is payable, the amount of all reasonable expenses (including
without limitation the cost of any insurance, taxes, or other charges) incurred
by the Lender in connection with the Lender's custody, preservation, use, or
operation of the Mortgaged Property, together with interest thereon from the
date incurred by the Lender at the Default Rate; and all such expenses, costs,
taxes, interest, and other charges shall be and become a part of the
Indebtedness.  It is agreed, however, that the risk of loss or damage to the
Mortgaged Property is on the Borrower, and the Lender shall have no liability
whatsoever for decline in value of the Mortgaged Property, for failure to
obtain or maintain insurance, or for failure to determine whether insurance in
force is adequate as to amount or as to the risks insured.  Possession by the
Lender shall not be deemed an election of judicial relief, if any such
possession is requested or obtained, with respect to any Mortgaged Property or
collateral not in the Lender's possession.

         (f)     If the liens or security interests hereof shall be foreclosed
by power of sale granted herein, by judicial action, or otherwise, the
purchaser at any such sale shall receive, as an incident to purchaser's
ownership, immediate possession of the property purchased, and if the Borrower
or the Borrower's successors shall hold possession of said property or any part
thereof subsequent to foreclosure, the Borrower and the Borrower's successors
shall be considered as tenants at sufferance of the purchaser at foreclosure
sale (without limitation of other rights or remedies, at a reasonable rental
per day, due and payable daily, based upon the value of the portion of the
Mortgaged Property so occupied and sold to such purchaser), and anyone
occupying such portion of the Mortgaged Property, after demand is made for
possession thereof, shall be guilty of forcible detainer and shall be subject
to eviction and removal, forcible or otherwise, with or without process of law,
and all damages by reason of such eviction and removal are hereby expressly
waived.

         (g)     The proceeds from any foreclosure sale of the Mortgaged
Property  shall be applied by the Trustee to the Indebtedness in the following
order and priority:  (i) to the payment of all expenses of advertising,
selling, and conveying the Mortgaged Property or part





Deed of Trust, Mortgage and Security Agreement - Page 19
<PAGE>   20
thereof, and/or prosecuting or otherwise collecting Rents, proceeds, premiums,
or other sums including reasonable attorneys' fees and a reasonable fee or
commission to Trustee, not to exceed five percent of the proceeds thereof or
sums so received; (ii) to the Indebtedness and other obligations of the
Borrower set forth in the Loan Documents, in such order as Lender may determine
in its sole discretion; and (iii) the balance, if any, and to the extent
applicable, remaining after the full and final payment of the Indebtedness and
full performance and discharge of the obligations of the Borrower set forth in
the Loan Documents, to the holder or beneficiary of any inferior liens covering
the Mortgaged Property, if any, in order of the priority of such inferior liens
(Trustee and the Lender shall hereby be entitled to rely exclusively upon a
commitment for title insurance issued to determine such priority); and (iv) the
cash balance, if any, to the Borrower.   The balance of the Indebtedness
remaining unpaid, if any, shall remain fully due and owing in accordance with
the terms of the Note or the other Loan Documents.

         (h)     In the event a foreclosure hereunder is commenced by the
Trustee in accordance with the terms of this Deed of Trust, at any time before
the sale, Trustee may abandon the sale, and the Lender may then institute suit
for the collection of the Indebtedness and for the foreclosure of the liens and
security interests hereof and of the Loan Documents.  If the Lender should
institute a suit for the collection of the Indebtedness and for a foreclosure
of the liens and security interests, the Lender may, at any time before the
entry of a final judgment in said suit, dismiss the same and require the
Trustee to sell the Mortgaged Property or any part thereof in accordance with
the provisions of this Deed of Trust.

         (i)     Lender, as a matter of right and without regard to the
sufficiency of the security for repayment of the Indebtedness and performance
and discharge of the obligations of Borrower set forth in the Loan Documents,
without notice to the Borrower and without any showing of insolvency, fraud, or
mismanagement on the part of the Borrower, and without the necessity of filing
any judicial or other proceeding other than the proceeding for appointment of a
receiver, shall be entitled to the appointment of a receiver or receivers of
the Mortgaged Property or any part thereof, and of the rents from the Mortgaged
Property, and the Borrower hereby irrevocably consents to the appointment of a
receiver or receivers.  Any receiver appointed pursuant to the provisions of
this subsection shall have the usual powers and duties of receivers in such
matters.

         (j)     In addition to any other remedies set forth herein, Lender
shall have all of the rights and remedies provided by the Texas Uniform
Commercial Code, including the right to proceed under the Texas Uniform
Commercial Code provisions governing default as to any fixtures, equipment,
instruments, general intangibles, accounts, contract rights, claims or personal
property which may be included in or related to the Mortgaged Property and as
to any deposits, policies, unearned premiums, proceeds, awards, payments or
consideration assigned to Lender as further security hereunder, separately from
the real estate included in the Mortgaged Property, or to proceed as to any or
all of such property in accordance with its rights and remedies in respect of
said real estate.  If the Lender should elect to proceed separately as to any
such property, the Borrower agrees to make such property available to the
Lender at a place or places reasonably acceptable to Lender, and, if any
notification of intended disposition of any of such property is required by
law, such notification shall be





Deed of Trust, Mortgage and Security Agreement - Page 20
<PAGE>   21
deemed commercially reasonable and reasonably and properly given if mailed at
least ten (10) days before such disposition in the manner below provided.

         (k)     In the case of any receivership, insolvency, bankruptcy,
reorganization, arrangement, readjustment, composition, dissolution,
liquidation, termination or other judicial proceedings affecting Borrower, its
creditors or its property, Lender, to the extent permitted by law, shall be
entitled to file such proofs of claim and other documents as may be necessary,
or advisable in order to have its claims allowed in such proceedings for the
entire amount due and payable under the Note, this Deed of Trust and any other
instrument securing or referring to the Note, at the date of institution of
such proceedings, and for any additional amounts which may become due and
payable hereunder and thereunder after such date, including but not limited to
Lender's costs, expenses and attorneys' fees incurred in connection therewith.

         20.     Estoppel Certificate.  The Borrower agrees at any time and
from time to time, upon not less than fifteen (15) days prior notice by the
Lender, to execute, acknowledge and deliver, without charge, to the Lender or
to any person designated by the Lender, a statement in writing certifying that
this Deed of Trust is unmodified (or if there have been modifications,
identifying the same by the date thereof and specifying the nature thereof),
the principal amount then secured hereby and the unpaid balance of the Note,
that the Borrower has not received any notice of default or notice of
acceleration or foreclosure of this Deed of Trust (or if the Borrower has
received such a notice, that it has been revoked, if such be the case), that to
the knowledge of the Borrower no Event of Default exists hereunder (or if any
such Event of Default does exist specifying the same and stating that the same
has been cured, if such be the case), that the Borrower to its knowledge has no
claims or offsets against the Lender (or if the Borrower has any such claims,
specifying the same), and the dates to which the interest and the other sums
and charges payable by the Borrower pursuant to the Note have been paid.  Upon
reasonable advance written request, the Lender shall provide the Borrower a
statement in writing respecting the unpaid balance of the Note and whether, to
the knowledge of the Lender, any Event of Default exists.

         21.     Forbearance Not a Waiver; Rights and Remedies Cumulative.  No
delay by the Lender in exercising any right or remedy provided herein or
otherwise afforded by law or equity shall be deemed a waiver of or preclude the
exercise of such right or remedy, and no waiver by the Lender of any particular
provision of this Deed of Trust shall be deemed effective unless in writing
signed by the Lender.  All such rights and remedies provided for herein or
which the Lender or the holder of the Note may have otherwise, at law or in
equity, shall be distinct, separate and cumulative and may be exercised
concurrently, independently or successively in any order whatsoever, and as
often as the occasion therefor arises.  The Lender's taking action pursuant to
paragraph 13 or receiving proceeds, awards or damages pursuant to paragraphs 10
or 14 shall not impair any right or remedy available to the Lender under
paragraph 19 hereof.  Acceleration of maturity of the Note, once claimed
hereunder by the Lender, may, at the option of the Lender, be rescinded by
written acknowledgment to that effect by the Lender, but the tender and
acceptance of partial payments alone shall not in any way affect or rescind
such acceleration of maturity of the Note.





Deed of Trust, Mortgage and Security Agreement - Page 21
<PAGE>   22
         22.     Successors and Assigns Bound; Number; Gender; Agents;
Captions; Amendments.  The covenants and agreements herein contained shall
bind, and the rights hereunder shall inure to, the respective heirs, legal
representatives, successors and assigns of the Lender and the Borrower;
provided, however, that this paragraph 22 shall not limit the effect of
paragraph 18(g).  Wherever used, the singular number shall include the plural,
and the plural the singular, and the use of any gender shall apply to all
genders.  The captions and headings of the paragraphs of this Deed of Trust are
for convenience only and are not to be used to interpret or define the
provisions hereof.  No amendment of this Deed of Trust shall be effective
unless in a writing executed by the Borrower and the Lender.

         23.     Notice.  (a)  All notices hereunder shall be in writing, and
shall be deemed to have been sufficiently given or served for all purposes when
presented personally or, if sent by mail, on the third business day after being
deposited in the United States Mail, postage prepaid, registered or certified
with return receipt requested.  Any notices delivered hereunder shall be
addressed as follows unless otherwise notified in accordance herewith:

         Borrower:        Craftmade International, Inc.
                          650 S. Royal
                          Coppell, Texas 75019

         Lender:          Allianz Life Insurance Company of North America
                          c/o Allianz Investment Corporation
                          55 Greens Farms Road
                          P.O. Box 5160
                          Westport, Connecticut 06881-5160

         (b)     Borrower hereby requests that any notice of default and any
notice of sale hereunder be mailed to it at the address set forth in paragraph
23 above; provided, however, that it is understood and agreed that any notice
of default, notice of intent to accelerate, notice of sale or any other notice
required to be given by statute or other applicable law to the Borrower may be
sent, and shall be deemed to be delivered, in the manner provided by such
statute or other applicable law.

         24.     Governing Law; Severability.  This Deed of Trust shall be
governed by the substantive laws of the State of Texas. In the event that any
provision or clause of this Deed of Trust conflicts with applicable law, such
conflict shall not affect other provisions of this Deed of Trust which can be
given effect without the conflict provisions and to this end the provisions of
this Deed of Trust are declared to be severable.

         25.     Counterparts.  This Deed of Trust may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.

         26.     Production of Documents.  The Borrower shall, while this Deed
of Trust is in full force and effect, furnish the Lender with such documents,
instruments and papers as the Lender may request from time to time in order for
the Lender to effectuate a sale or a participation in the loan evidenced by the
Note and this Deed of Trust.





Deed of Trust, Mortgage and Security Agreement - Page 22
<PAGE>   23
         27.     Waiver of Marshalling.  The Borrower, any party who consents
to this Deed of Trust and any party who now or hereafter acquires a lien on the
Mortgaged Property and who has actual or constructive notice of this Deed of
Trust hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.

         28.     Fixture Filing.  From the date of its recording, this Deed of
Trust shall be effective as a financing statement filed as a fixture filing
with respect to all goods constituting part of the Mortgaged Property (as more
particularly described in item (ii) of the granting clause of this Deed of
Trust) which are or are to become fixtures related to the real estate described
herein.  For this purpose, the following information is set forth:

         (a)     Name and Address of Debtor:

                 Craftmade International, Inc.
                 650 S. Royal
                 Coppell, Texas 75019
                 (Tax Identification No. 75-2057054)

         (b)     Name and Address of Secured Party:

                 Allianz Life Insurance Company of North America
                 c/o Allianz Investment Corporation
                 55 Greens Farms Road
                 P.O. Box 5160
                 Westport, CT 06881-5160
                 (Tax Identification No. 41-1366075)

         (c)     This documents covers goods which are or are to become
fixtures.

         (d)     The name of the record owner of the Land is the Debtor
described above.

         29.     Concerning the Trustee.

         (a)     The Trustee shall not be required to take any action toward
the execution and enforcement of the trust hereby created or to institute,
appear in, or defend any action, suit, or other proceeding in connection
therewith where, in his opinion, such action would be likely to involve him in
expense or liability, unless requested so to do by a written instrument signed
by Lender and, if Trustee so requests, unless the Trustee is tendered security
and indemnity satisfactory to the Trustee against any and all cost, expense,
and liability arising therefrom.  Trustee shall not be responsible for the
execution, acknowledgment, or validity of the Loan Documents, or for the proper
authorization thereof, or for the sufficiency of the lien and security interest
purported to be created hereby, and Trustee makes no representation in respect
thereof or in respect of the rights, remedies, and recourses of Lender.

         (b)     With the approval of the Lender, the Trustee shall have the
right to take any and all of the following actions:  (i) to select, employ, and
advise with counsel (who may be, but need not be, counsel for the Lender) upon
any matters arising hereunder, including the





Deed of Trust, Mortgage and Security Agreement - Page 23
<PAGE>   24
preparation, execution, and interpretation of the Loan Documents, and shall be
fully protected in relying as to legal matters on the advice of counsel, (ii)
to execute any of the trusts and powers hereof and to perform any duty
hereunder either directly or through his agents or attorneys, (iii) to select
and employ, in and about the execution of his duties hereunder, suitable
accountants, engineers and other experts, agents and attorneys-in-fact, either
corporate or individual, not regularly in the employ of Trustee, and Trustee
shall not be answerable for any act, default, negligence, or misconduct of any
such accountant, engineer or other expert, agent or attorney-in-fact, if
selected with reasonable care, or for any error of judgment or act done by
Trustee in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever, except for Trustee's gross negligence or bad faith,
and (iv) any and all other lawful action as the Lender may instruct Trustee to
take to protect or enforce the Lender's rights hereunder.  Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering by virtue of
the powers herein granted to Trustee, upon the Mortgaged Property for debts
contracted for or liability or damages incurred in the management or operation
of the Mortgaged Property.  Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting any action taken
or proposed to be taken by Trustee hereunder, believed by Trustee in good faith
to be genuine.  Trustee shall be entitled to reimbursement for expenses
incurred by Trustee in the performance of Trustee's duties hereunder and to
reasonable compensation for such of Trustee's services hereunder as shall be
rendered.  The Borrower will, from time to time, pay the compensation due to
Trustee hereunder and reimburse Trustee for, and save Trustee harmless against,
any and all liability and expenses which may be incurred by Trustee in the
performance of Trustee's duties.

         (c)     All moneys received by Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other moneys
(except to the extent required by applicable law) and Trustee shall be under no
liability for interest on any moneys received by Trustee hereunder.

         (d)     The Trustee may resign by the giving of notice of such
resignation in writing or verbally to Lender.  If the Trustee shall die,
resign, or become disqualified from acting in the execution of this trust, or
if, for any reason, the Lender shall prefer to appoint a substitute trustee or
multiple substitute trustees, or successive substitute trustees or successive
multiple substitute trustees, to act instead of the forenamed Trustee, the
Lender shall have full power to appoint a substitute trustee (or, if preferred,
multiple substitute trustees) in succession who shall succeed (and if multiple
substitute trustees are appointed, each of such multiple substitute trustees
shall succeed) to all the estates, rights, powers, and duties of the forenamed
Trustee.  Such appointment may be executed by any authorized agent of the
Lender, and if such Lender be a corporation and such appointment be executed in
its behalf by any officer of such corporation, such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any
superior officer of the corporation.  Borrower hereby ratifies and confirms any
and all acts which the forenamed Trustee, or his successor or successors in
this trust, shall do lawfully by virtue hereof.  If multiple substitute
Trustees are appointed, each of such multiple substitute Trustees shall be
empowered and authorized to act alone without the necessity of the joinder of
the other multiple substitute trustees, whenever any action or undertaking of
such substitute trustees is requested or required under or pursuant to this
Deed of Trust or applicable law.





Deed of Trust, Mortgage and Security Agreement - Page 24
<PAGE>   25
         (e)     Should any deed, conveyance, or instrument of any nature be
required from the Borrower by any Trustee or substitute Trustee to more fully
and certainly vest in and confirm to the Trustee or substitute Trustee such
estates, rights, powers, and duties, then, upon request by the Trustee or
substitute Trustee, any and all such deeds, conveyances and instruments shall
be made, executed, acknowledged, and delivered and shall be caused to be
recorded and/or filed by Borrower.

         (f)     Any substitute Trustee appointed pursuant to any of the
provisions hereof shall, without any further act, deed, or conveyance, become
vested with all the estates, properties, rights, powers, and trusts of its or
his predecessor in the rights hereunder with like effect as if originally named
as Trustee herein; but nevertheless, upon the written request of the Lender or
of the substitute Trustee, the Trustee ceasing to act shall execute and deliver
any instrument transferring to such substitute Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver any of
the property and moneys held by such Trustee to the substitute Trustee so
appointed in the Trustee's place.

         (g)     By accepting or approving anything required to be observed,
performed, or fulfilled or to be given to the Trustee or the Lender pursuant to
the Loan Documents, including without limitation, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal, or insurance policy, neither the Trustee nor the Lender
shall be deemed to have warranted, consented to, or affirmed the sufficiency,
legality, effectiveness, or legal effect of the same, or of any term,
provision, or condition thereof, and such acceptance or approval thereof shall
not be or constitute any warranty or affirmation with respect thereto by
Trustee or the Lender.

         30.     INDEMNITIES.  THE BORROWER SHALL PROTECT, DEFEND, INDEMNIFY
AND SAVE HARMLESS THE LENDER AND THE TRUSTEE FROM AND AGAINST ALL LIABILITIES,
OBLIGATIONS, CLAIMS, DEMANDS, DAMAGES, PENALTIES, CAUSES OF ACTION, LOSSES,
FINES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND DISBURSEMENTS),
IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST THE LENDER AND/OR THE TRUSTEE
BY REASON OF: (A) OWNERSHIP OF THIS DEED OF TRUST OR ANY INTEREST IN THE
MORTGAGED PROPERTY OR RECEIPT OF ANY RENTS AND PROFITS; (B) ANY ACCIDENT,
INJURY TO OR DEATH OF PERSONS OR LOSS OF OR DAMAGE TO PROPERTY OCCURRING IN, ON
OR ABOUT THE MORTGAGED PROPERTY, OR ANY PART THEREOF, OR ON THE ADJOINING
SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT PARKING AREAS, STREETS OR WAYS;
(C) ANY FAILURE ON THE PART OF THE BORROWER TO PERFORM OR COMPLY WITH ANY OF
THE TERMS OF THIS DEED OF TRUST; (D) ANY FRAUD OR MATERIAL MISREPRESENTATION
COMMITTED BY THE BORROWER IN CONNECTION WITH THE INDEBTEDNESS SECURED BY THIS
DEED OF TRUST; (E) ANY WASTE OF THE MORTGAGED PROPERTY ARISING FROM THE ACTS OF
THE BORROWER; (F) THE FAILURE OF THE BORROWER TO PAY TAXES, INSURANCE PREMIUMS,
UTILITY CHARGES AND OTHER EXPENSES OF OPERATING THE MORTGAGED PROPERTY; (G) THE
DISPOSITION OF INSURANCE OR CONDEMNATION PROCEEDS IN A MANNER NOT AUTHORIZED BY
THE PROVISIONS OF THIS DEED OF TRUST; (H) THE MISAPPLICATION OF SECURITY
DEPOSITS OR PREPAID RENTS BY THE BORROWER; (I) ANY FAILURE OF THE MORTGAGED
PROPERTY TO COMPLY WITH ANY





Deed of Trust, Mortgage and Security Agreement - Page 25
<PAGE>   26
APPLICABLE LAWS.  THE FOREGOING INDEMNITY FOR THE BENEFIT OF LENDER AND TRUSTEE
IS INTENDED TO BE APPLICABLE AND BINDING UPON THE BORROWER NOTWITHTANDING THAT
A LIABILITY, OBLIGATION, CLAIM, DEMAND, DAMAGE, PENALTY, CAUSE OF ACTION, LOSS,
FINE, COST OR EXPENSE DESCRIBED IN THE PRECEDING PROVISIONS OF THIS PARAGRAPH
30 ARISES OR IS ALLEGED TO HAVE ARISEN FROM THE SOLE OR CONCURRENT NEGLIGENCE
OF LENDER OR TRUSTEE; HOWEVER, SAID INDEMNITY IS NOT INTENDED TO INCLUDE ANY
LIABILITIES, OBLIGATIONS, CLAIMS, DEMANDS, DAMAGES, PENALTIES, CAUSES OF
ACTION, LOSSES, FINES, COSTS OR EXPENSES ARISING FROM THE WILLFUL MISCONDUCT OF
LENDER OR TRUSTEE.

         31.     Further Documentation.  At any time and from time to time
until payment in full of the Indebtedness, the Borrower will, at the request of
the Lender, promptly execute and deliver to the Lender such additional
instruments as may be reasonably required further to evidence the lien of this
Deed of Trust and further to protect the security interest of the Lender with
respect to the Mortgaged Property, including, without limitation, additional
security agreements, financing statements and continuation statements.  Any
expenses incurred by the Lender in connection with the preparation and
recordation of any such instruments, including, but not limited to reasonable
attorneys' fees, shall become additional Indebtedness of the Borrower secured
by this Deed of Trust.  Unless the Borrower and the Lender agree in writing to
other terms of repayment, such amounts shall be immediately due and payable,
and shall bear interest from the date of disbursement at the interest rate
stated in the Note, unless collecting from the Borrower of interest at such
rate would be contrary to applicable law, in which event such amounts shall
bear interest at the highest rate which may be collected from the Borrower
under applicable law.

         32.     Release.  If the Indebtedness is paid in full in accordance
with the terms of this Deed of Trust, the Note, and the other Loan Documents,
and if the Borrower shall well and truly perform each and every one of the
obligations to be performed and discharged in accordance with the terms of this
Deed of Trust, the Note and the other Loan Documents, then this conveyance
shall become null and void and be released at Grantor's request and expense,
and the Lender shall have no further obligation to make advances under and
pursuant to the provisions hereof or in the other Loan Documents.

         33.     Performance at the Borrower's Expense.  Subject to the
provisions of paragraph 34 hereof, the Borrower shall (a) pay all legal fees
incurred by the Lender in connection with the preparation of the Loan Documents
(including any amendments thereto or consents, releases, or waivers granted
thereunder); (b) reimburse the Lender, promptly upon demand, for all amounts
expended, advanced, or incurred by the Lender to satisfy any obligation of the
Borrower under the Loan Documents, which amounts shall include all court costs,
attorneys' fees (including, without limitation, for trial, appeal, or other
proceedings), fees of auditors and accountants and other investigation expenses
reasonably incurred by the Lender in connection with any such matters; and (c)
any and all other costs and expenses of performing or complying with any and
all of the obligations of the Borrower set forth in the Loan Documents.  Except
to the extent that costs and expenses are included within the definition of
"Indebtedness," the payment of such costs and expenses shall not be credited,
in any way and to any extent, against any installment on or portion of the
Indebtedness.





Deed of Trust, Mortgage and Security Agreement - Page 26
<PAGE>   27
         34.     Usury Savings Clause.     It is expressly stipulated and
agreed to be the intent of the Borrower and the Lender at all times to comply
with applicable Texas law governing the maximum rate or amount of interest
payable on the Note or the other indebtedness secured hereby and by the other
Loan Documents (or applicable United States federal law to the extent that it
permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under Texas law).  If any amount of interest charged,
taken or received by Lender shall be in excess of the maximum amount of
interest permitted by applicable law, then it is the Borrower's and the
Lender's express intent that (a) any excess amounts theretofore collected by
the Lender be credited on the principal balance of the Note (or, if the Note
has been or would thereby be paid in full, refunded to the Borrower), and (b)
the provisions of the Note, this Deed of Trust and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance and
detention of the indebtedness secured hereby and by the other Loan Documents
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in effect and
applicable to such indebtedness for so long as such debt is outstanding.  To
the extent that the Lender is relying on Article 5069-1.04, as amended, of the
Revised Civil Statutes of Texas to determine the maximum lawful rate payable on
such indebtedness, the Lender will utilize the indicated (weekly) rate ceiling
from time to time in effect as provided in Article 5069-1.04, as amended and/or
succeeded.  To the extent United States federal law permits the Lender to
contract for, charge or receive a greater amount of interest than Texas law,
the Lender will rely on United States federal law instead of such Article
5069-1.04, as amended and/or succeeded, for the purpose of determining the
maximum lawful rate.  Additionally, to the extent permitted by applicable law
now or hereafter in effect, the Lender may, at its option and from time to
time, implement any other method of computing the maximum lawful rate under
such Article 5069-1.04, as amended or succeeded, or under other applicable law
by giving notice, if required, to the Borrower as provided by applicable law
now or hereafter in effect.  The Borrower agrees that if, at any time, the
Borrower should have reason to believe that the Lender has contracted for,
charged or collected interest in excess of the maximum amount of interest
permitted by applicable law, then the Borrower will give the Lender notice of
such condition and the Lender shall have ninety (90) days after receipt of such
notice in which to make appropriate refund or other adjustment in order to
correct such condition, if in fact a refund or other adjustment is necessary in
order to comply with applicable usury laws.  If the Lender makes any
appropriate refund or other adjustment necessary to comply with applicable
usury laws within such ninety (90) day period, then the Lender shall not be
subject to any penalties for contracting for, charging or receiving interest in
excess of the maximum lawful rate.





Deed of Trust, Mortgage and Security Agreement - Page 27
<PAGE>   28
         35.     Covenants Running with the Land.  All obligations contained in
this Deed of Trust and the other Loan Documents are intended by the Borrower,
the Lender, and the Trustee to be, and shall be construed as, covenants running
with the Mortgaged Property until the lien of this Deed of Trust has been fully
released by the Lender.

         36.     Subrogation.  If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Mortgaged Property, then, to the extent of such funds so used, the
Lender shall be subrogated to all of the rights, claims, liens, titles, and
interests existing against the Mortgaged Property heretofore held by, or in
favor of, the holder of such indebtedness and such former rights, claims,
liens, titles, and interests, if any, are not waived but rather are continued
in full force and effect in favor of the Lender and are merged with the lien
and security interest created herein as cumulative security for the repayment
of the Indebtedness and the performance and discharge of the obligations of
Borrower set forth in the Loan Documents.

         IN WITNESS WHEREOF, the Borrower has caused this Deed of Trust to be
duly executed to be effective as of the ____ day of December, 1995.


                                        CRAFTMADE INTERNATIONAL, INC.,
                                        a Delaware corporation
                                        
                                        
                                        
                                        By: __________________________________
                                        Name: ________________________________
                                        Title: _______________________________





Deed of Trust, Mortgage and Security Agreement - Page 28
<PAGE>   29
STATE OF _________   Section
                     Section
COUNTY OF _______    Section

         This instrument was acknowledged before me on the _____ day of
December, 1995, by _________________________, _______________________ of
Craftmade International, Inc., a Delaware corporation, on behalf of said
corporation.

                                        _________________________________
                                        Notary Public

My Commission Expires:


_____________________





Deed of Trust, Mortgage and Security Agreement - Page 29
<PAGE>   30

                                   EXHIBIT A

                               Legal Description


Being a tract or parcel of land situated in the William K. Payne Survey,
Abstract No. 1140, the T.J. Thweatt Survey, Abstract No. 1753, and the S.A. &
M.G.R.R. Survey, Abstract No. 1439, City of Coppell, Dallas County, Texas, same
being all of Lot 3R out of a Replat of Freeport North, recorded in Volume
95245, Page 2050, Dallas County Plat Records.  Same also being a portion of
that certain 31.9602 acre tract conveyed to MEPC Quoruem Properties II, Inc. by
instrument of record in Volume 95098, Page 968, Dallas County Deeds Records.
Said tract being more particularly described by metes and bounds as follows:

BEGINNING at a 1/2" iron rod set for the northeasterly corner of said 31.9602
acre tract from which a found fence corner post bears North 89 degrees 40
minutes 00 seconds East, 2028.84 feet.  Said iron rod also being the
northwesterly corner of that certain 100.00 acre tract of land conveyed to
Coppel Industrial N.V. by instrument of record in Volume 82071, Page 1061,
Dallas County Deed Records.  Same also being in the southerly line of that
certain 214.09 acre tract of land conveyed to Angeles Esteve by instrument of
record in Volume 88246, Page 4209, Dallas County Deed Records;

THENCE along the common line of said 100.00 acre tract and said 31.9602 acre
tract, South 00 degrees 11 minutes 33 seconds East, 1115.00 feet to a 1/2" iron
rod set for corner;

THENCE departing said common line, South 89 degrees 48 minutes 27 seconds West,
450.00 feet to a 1/2" iron rod set for corner;

THENCE South 44 degrees 48 minutes 27 seconds West, 45.00 feet to a 1/2" iron
rod set for corner;

THENCE South 34 degrees 16 minutes 20 seconds West, 33.17 feet to a 1/2" iron
rod set for corner in the easterly right- of-way line of Royal Lane, 100 feet
wide;

THENCE along said easterly line the following three (3) courses:

         (1)     239.13 feet along the arc of a non-tangent curve to the left
                 having a radius of 1050.00 feet, a central angle of 13 degrees
                 02 minutes 56 seconds and a chord bearing and distance on
                 North 62 degrees 15 minutes 08 seconds West, 238.62 feet to a
                 1/2" iron rod found for a point of tangency;

         (2)     North 68 degrees 46 minutes 36 seconds West, 150.00 feet to a
                 1/2" iron rod found for a point of curvature;





Deed of Trust, Mortgage and Security Agreement - Page 30
<PAGE>   31

         (3)     275.29 feet along the arc of a tangent curve to the right
                 having a radius of 950.00 feet, a central angle of 16 degrees
                 36 minutes 11 seconds and a chord bearing and distance of
                 North 60 degrees 28 minutes 30 seconds West, 274.33 feet to a
                 1/2" iron rod set for corner;

THENCE departing said easterly line, North 89 degrees 41 minutes 59 seconds
East, 460.92 feet to a 1/2" iron rod set for corner;

THENCE North 00 degrees 18 minutes 01 seconds West, 869.55 feet to a 1/2" iron
rod set for corner in the southerly line of said 214.09 acre Esteve Tract;

THENCE along the common line of said Esteve Tract and said 31.9602 acre tract,
North 89 degrees 41 minutes 59 seconds East, 630.00 feet to the POINT OF
BEGINNING.





Deed of Trust, Mortgage and Security Agreement - Page 31
<PAGE>   32
                                   EXHIBIT B

                             Permitted Encumbrances


1.       Standby fees, taxes and assessments by any taxing authority for the
         year 1996.

2.       Terms, conditions, easements and liens contained in instrument
         recorded in Volume 95098, Page 924, Deed Records of Dallas County,
         Texas, and as noted on survey of Rust Lichliter/Jameson, certified to
         by G. Dennis Qualls, R.P.L.S. #4276, dated December 13, 1995.

3.       Unrecorded lease between TSI Prime, Inc. and Craftmade International,
         Inc.

4.       The following easements as shown on plat recorded in Volume 95245,
         Page 2050, Map Records of Dallas County, Texas: 10' of a 30' firelane
         and access easement along West property line; 20' drainage easement
         along the North, West and East property lines; 20' x 20' utility
         easement in the Southwestern portion of the property; 15' utility
         easements in Southwestern portion and adjacent to Southwest property
         lines; 24' firelanes and access easement adjacent to South, East and
         North property lines, and as shown on survey of Rust
         Lichliter/Jameson, certified to by G. Dennis Qualls, R.P.L.S. #4276,
         dated December 13, 1995.

5.       10' and 60' setback lines as shown on survey of Rust
         Lichliter/Jameson, certified to by G. Dennis Qualls, R.P.L.S. #4276,
         dated December 13, 1995.

6.       Reciprocal Easement and Maintenance Agreement dated as of December 20,
         1995, by and between MEPC Quorum Properties II, Inc. and Craftmade
         International, Inc., to be filed of record in the Real Property
         Records of Dallas County, Inc.





Deed of Trust, Mortgage and Security Agreement - Page 32