<PAGE>

                                                                   EXHIBIT 10.31

[LOGO]

                      BUSINESS LOAN AGREEMENT (ASSET BASED)

 PRINCIPAL      LOAN DATE  MATURITY  LOAN NO CALL/COLL  ACCOUNT OFFICER INITIALS
$2,000,000.00  06-14-2004 10-31-2005  9001              3560802    146

  References in the shaded area are for Lender's use only and do not limit the
  applicability of this document to any particular loan or item. Any item above
        containing "**"" has been omitted due to text length limitations.


 BORROWER: DESIGN TRENDS. LLC (TIN: 75-2841381) LENDER: THE FROST NATIONAL BANK
           P.O. BOX 1037                                HULEN FINANCIAL CENTER
           COPPELL, TX 75019                            P.O. BOX 1600
                                                        SAN ANTONIO, TX 78296

THIS BUSINESS LOAN AGREEMENT (ASSET BASED) DATED JUNE 14, 2004, IS MADE AND
EXECUTED BETWEEN DESIGN TRENDS, LLC ("BORROWER") AND THE FROST NATIONAL BANK
("LENDER") ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR
COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR
LOANS OR OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED
ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT ("LOAN"). BORROWER
UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN,
LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS AS
SET FORTH IN THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OR ANY
LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND
DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND REMAIN SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT.

TERM. This Agreement shall be effective as of June 14, 2004, and shall continue
in full force end effect until such time as all of Borrower's Loans in favor of
Lender have been paid in full, including principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until such time as the parties
may agree in writing to terminate this Agreement.

LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advance outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows:

      CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any
      Advance to or for the account of Borrower under this Agreement is subject
      to the following conditions precedent, with all documents, instruments,
      opinions, reports, and other items required under this Agreement to be in
      form and substance satisfactory to Lender:

            (1) Lender shall have received evidence that this Agreement and all
            Related Documents have bean duly authorized, executed, and delivered
            by Borrower to Lender.

            (2) Lender shall have received such opinions of counsel,
            supplemental opinions, and documents as Lender may request.

            (3) The security interests in the Collateral shall have been duly
            authorized, created, and perfected with first lien priority and
            shall be in full force and effect.

            (4) All guaranties required by Lender for the credit facility(ies)
            shall have been executed by each Guarantor, delivered to Lender, and
            be in full force and effect.

            (5) Lender, at its option and for its sole benefit, shall have
            conducted an audit of Borrower's Accounts. Inventory, books, records
            and operations, and Lender shall be satisfied as to their condition.

            (6) Borrower shall have paid to Lender all fees, costs, and expenses
            specified in this Agreement and the Related Documents as are then
            due and payable.

            (7) There shall not exist at the time of any Advance a condition
            which would constitute an Event of Default under this Agreement, and
            Borrower shall have delivered to Lender the compliance certificate
            called for in the paragraph below titled "Compliance Certificate."

      MAKING LOAN ADVANCES. Advances under this credit facility, as well as
      directions for payment from Borrower's accounts, may be requested orally
      or in writing by authorized persons. Lender may. but need not, require
      that all oral requests be confirmed in writing. Each Advance shall be
      conclusively deemed to have been made at the request of and for the
      benefit of Borrower (1) when credited to any deposit account of Borrower
      maintained with Lender or (2) when advanced in accordance with the
      instructions of an authorized person. Lender, at its option, may set a
      cutoff time, after which all requests for Advances will be treated as
      having been requested on the next succeeding Business Day.

      MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount
      of the outstanding Advances shall exceed the applicable Borrowing Base,
      Borrower, immediately upon written or oral notice from Lender, shall pay
      to Lender an amount equal to the difference between the outstanding
      principal balance of the Advances and the Borrowing Base. On the
      Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid
      principal amount of all Advances then outstanding and all accrued unpaid
      interest, together with all other applicable fees, costs and charges, if
      any, not yet paid.

      LOAN ACCOUNT. Lender shall maintain on its books a record of account in
      which Lender shall make entries for each Advances and such other debits
      and credits as shall be appropriate in connection with the credit
      facility. Lender shall provide Borrower with periodic statements of
      Borrower's account, which statements shall be considered to be correct and
      Conclusively binding on Borrower unless Borrower notifies Lender to the
      contrary within thirty (30) days after Borrower's receipt of any such
      statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Primary Credit Facility and performance of
all other Loan, obligations and duties Owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require. Lender's Security Interests in the Collateral
shall be continuing liens and shall include the proceeds and products of the
Collateral, including without limitation the proceeds of any insurance. With
respect to the Collateral, Borrower agrees and represents and warrants to
Lender:

      PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute financing
      statements and all documents perfecting Lender's Security Interest and to
      take whatever other (actions are requested by Lender to perfect and
      continue lender's Security Interests in the Collateral. Upon

<PAGE>

                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                  (CONTINUED)                             PAGE 2

      request of Lender, Borrower will deliver to Lender any and all of the
      documents evidencing or constituting the Collateral, and Borrower will
      note Lender's interest upon any and all chattel paper and instruments. If
      not delivered to Lender for possession by Lender. Contemporaneous with the
      execution of this Agreement, Borrower will execute one or more UCC
      financing statements and any similar statements as may be required by
      applicable law, and Lender will file such financing statements and all
      such similar statements in the appropriate location or locations. Borrower
      hereby appoints Lender as its irrevocable attorney-in-fact for the purpose
      of executing any documents necessary to perfect or to continue any
      Security Interest. Lender may at any time, and without further
      authorization from Borrower, file a carbon, photograph, facsimile, or
      other reproduction of any financing statement for use as a financing
      statement. Borrower will reimburse Lender for all expenses for the
      perfection, termination, and the continuation of the perfection of
      Lender's security interest in the Collateral. Borrower promptly will
      notify Lender before any change in Borrower's name including any change to
      the assumed business names of Borrower. Borrower also promptly will notify
      Lender before any change in Borrower's Social Security Number or Employer
      Identification Number. Borrower further agrees to notify Lender in writing
      prior to any change in address or location of Borrower's principal
      governance office or should Borrower merge or consolidate with any other
      entity.

      COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall,
      keep correct and accurate records of the Collateral, all of which records
      shall be available to Lender or Lender's representative upon demand for
      inspection and copying at any reasonable time. With respect to the
      Accounts, Borrower agrees to keep and maintain such records as Lender may
      require, including without limitation information concerning Eligible
      Accounts and Account balances and agings. Records related to Accounts
      (Receivables) are or will be located at principal office of Borrower. With
      respect to the Inventory, Borrower agrees to keep and maintain such
      records as Lender may require, including without limitation information
      concerning Eligible Inventory and records itemizing and describing the
      kind, type, quality, and quantity of Inventory, Borrower's Inventory costs
      and selling prices, and the daily withdrawals and additions to Inventory,
      Records related to Inventory are or will be located at . The above is an
      accurate and complete list of all locations at which Borrower keeps or
      maintains business records concerning Borrower's collateral.

      COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
      Agreement, Borrower shall execute and deliver to Lender schedules of
      Accounts and Inventory and schedules of Eligible Accounts and Eligible
      Inventory in form and substance satisfactory to the Lender. Thereafter
      supplemental schedules shall be delivered according to the following
      schedule: With respect to Eligible Accounts, schedules shall be delivered
      as stated below.

      REPRESANTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to the
      Accounts, Borrower represents and warrants to Lender: (1) Each Account
      represented by Borrower to be an Eligible Account for purposes of this
      Agreement conforms to the requirements of the definition of an Eligible
      Account; (2) All Account information listed on schedules delivered to
      Lender will be true and correct, subject to immaterial variance; and (3)
      Lender, its assigns, or agents shall have the right at any time and at
      Borrower's expense to inspect, examine, and audit Borrower's records and
      to confirm with Account Debtors the accuracy of such Accounts.

      REPRESENTATIONS AND WARRANTIES CONCERNING INVENTORY. With respect to the
      Inventory, Borrower represents and warrants to Lender: (1) All Inventory
      represented by Borrower to be Eligible Inventory for purposes of this
      Agreement conforms to the requirements of the definition of Eligible
      Inventory; (2) All Inventory values listed on schedule delivered to Lender
      will be true and correct, subject to immaterial variance; (3) The value of
      the inventory will be determined on a consistent accounting basis; (4)
      Except as agreed to the contrary by Lender in writing, all Eligible
      Inventory is now and at all times hereafter will be in Borrower's physical
      possession and shall not be held by others or consignment, sale on
      approval, or sale or return; (5) Except as reflected in the Inventory
      schedules delivered to Lender, all Eligible Inventory is now and at all
      times hereafter will be of good and merchantable quality, free from
      defects; (6) Eligible Inventory is not now and will not at any time
      hereafter be stored with a bailee, warehouseman, or similar party without
      Lender's prior written consent, and, in such event, Borrower will
      concurrently at the time of bailmant cause any such bailee, warehouseman,
      or similar party to issue and deliver to Lender, in form acceptable to
      Lender, warehouse receipts in Lender name evidencing the storage of
      Inventory; and (7) Lender, its assigns, or agents shall have the right at
      any time and at Borrower's expense to inspect and examine the Inventory
      and to check and test the same as to quality, quantity, value, and
      condition.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.

      LOAN DOCUMENTS. Borrower shall provide 10 Lender the following documents
      for the Loan: (1) the Note; (2) Security Agreements granting to Lender
      security interests in the Collateral; (3) financing statements and all
      other documents perfecting Lender's Security Interests; (4) evidence of
      insurance as required below; (5) guaranties; (6) together with all such
      Related Documents as Lender may require for the Loan; all in form and
      substance satisfactory to Lender and Lender's counsel.

      BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
      substance satisfactory to Lender properly certified resolutions, duly
      authorizing the execution and delivery of this Agreement, the Note and the
      Related Documents. In addition, Borrower shall have provided such other
      resolutions, authorizations, documents and instruments as Lender or its
      counsel, may require.

      FEES AND EXPENSES UNDER THIS AGREEMENT. Borrower shall have paid to Lender
      all fees, costs, and expenses specified in this Agreement and the Related
      Documents as are then due and payable.

      REPRESENTATIONS AND WARRANTIES. The representations and warranties set
      forth in this Agreement, in the Related Documents, and in any document or
      certificate delivered to Lender under this Agreement are true and correct.

      NO EVENT OF DEFAULT. There shall not exist at the time of any Advance a
      condition which would constitute an Event of Default under this Agreement
      or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists;

      ORGANIZATION. Borrower is a limited liability company which is, and at all
      times shall be, duly organized, validly existing, and in good standing
      under and by virtue of the laws of the State of Delaware. Borrower is duly
      authorized to transact business in the State of Texas and all other states
      in which Borrower is doing business, having obtained all necessary
      filings, governmental licenses and approvals for each state in which
      Borrower is doing business. Specifically, Borrower is, and at all times
      shall be, duly qualified as a foreign limited liability company in all
      states in which the failure to so qualify would have a material adverse
      effect on its business or financial condition. Borrower has the full power
      and authority to own its properties and to transact the business in which
      it is presently engaged or presently proposes to engage. Borrower
      maintains an office at 650 S. Royal Lane, Suite 100. Coppell, TX 75019.
      Unless Borrower has designated otherwise in writing, the principal office
      is the office at which Borrower keeps its books and records including its
      records concerning the Collateral. Borrower will notify Lender prior to
      any change in the location of Borrower's state of organization or any
      change in Borrower's name. Borrower shall do all things necessary to
      preserve and to keep in full force and effect its existence, rights and
      privileges, and shall

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                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                   (CONTINUED)                            PAGE 3

      comply with all regulations, rules, ordinances, statutes, orders and
      decrees of any governmental or quasi-governmental authority or court
      applicable to Borrower and Borrower's business activities.

      ASSUMED BUSINESS NAMES. Borrower has filed or recorded all documents or
      filings required by law relating to all assumed business names used by
      Borrower. Excluding the name of Borrower, the following is a complete list
      of all assumed business names under which Borrower does business: None.

      AUTHORIZATION. Borrower's execution, delivery, and performance of this
      Agreement and all the Related Documents have been duly authorized by all
      necessary action by Borrower and do not conflict with, result in a
      violation of, or constitute a default under (1) any provision of (a)
      Borrower's articles of organization or membership agreements, or (b) any
      agreement or other instrument binding upon Borrower or (2) any law,
      governmental regulation, court decree, or order applicable to Borrower or
      to Borrower's properties.

      FINANCIAL INFORMATION. Each of Borrower's financial statements supplied to
      Lender truly and completely disclosed Borrower's financial condition as of
      the date of the statement, and there has been no material adverse change
      in Borrower's financial condition subsequent to the date of the most
      recent financial statement supplied to Lender. Borrower has no material
      contingent obligations except as disclosed in such financial statements.

      LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
      Borrower is required to give under this Agreement when delivered will
      constitute legal, valid, and binding obligations of Borrower enforceable
      against Borrower in accordance with their respective terms.

      PROPERTIES. Except as contemplated by this Agreement or as previously
      disclosed in Borrower's financial statements or in writing to Lender and
      as accepted by Lender, and except for property tax liens for taxes not
      presently due and payable, Borrower owns and has good title to all of
      Borrower's properties free and clear of all Security Interests, and has
      not executed any security documents or financing statements relating to
      such properties. All of Borrower's properties are titled in Borrower's
      legal name, and Borrower has not used or filed a financing statement under
      any other name for at least the last five (5) years.

      HAZARDOUS SUBSTANCES. Except as disclosed to and acknowledged by Lender in
      writing, Borrower represents and warrants that: (1) During the period of
      Borrower's ownership of Borrower's Collateral, there has been no use,
      generation, manufacture, storage, treatment, disposal, release or
      threatened release of any Hazardous Substance by any person on, under,
      about or from any of the Collateral. (2) Borrower has no knowledge of, or
      reason to believe that there has been (a) any breach or violation of any
      Environmental Laws; (b) any use, generation, manufacture, storage,
      treatment, disposal, release or threatened release of any Hazardous
      Substance on, under, about or from the Collateral by any prior owners or
      occupants of any of the Collateral; or (c) any actual or threatened
      litigation or claims of any kind by any person relating to such matters,
      (3) Neither Borrower nor any tenant, contractor, agent or other authorized
      user of any of the Collateral shall use, generate, manufacture, store,
      treat, dispose of or release any Hazardous Substance on, under, about or
      from any of the Collateral; and any such activity shall be conducted in
      compliance with all applicable federal, state, and local laws,
      regulations, and ordinances, including without limitation all
      Environmental Laws. Borrower authorizes Lender and its agents to enter
      upon the Collateral to make such inspections and tests as Lender may deem
      appropriate to determine compliance of the Collateral with this section of
      the Agreement. Any inspections or tests made by Lender shall be at
      Borrower's expense and for Lender's purposes only and shall not be
      construed to create any responsibility or liability on the part of Lender
      to Borrower or to any other person. The representations and warranties
      contained herein are based on Borrower's due diligence in investigating
      the Collateral for hazardous waste and Hazardous Substances. Borrower
      hereby (1) releases and waives any future claims against Lender for
      indemnity or contribution in the event Borrower becomes liable for cleanup
      or other costs under any such laws, and (2) agrees to indemnify and hold
      harmless Lender against any and all claims, losses, liabilities, damages,
      penalties, and expenses which Lender may directly or indirectly sustain or
      suffer resulting from a breach of this section of the Agreement or as a
      consequence of any use, generation, manufacture, storage, disposal,
      release or threatened release of a hazardous waste or substance on the
      Collateral. The provisions of this section of the Agreement, including the
      obligation to indemnify, shall survive the payment of the Indebtedness and
      the termination, expiration or satisfaction of this Agreement and shall
      not be affected by Lender's acquisition of any interest in any of the
      Collateral, whether by foreclosure or otherwise.

      LITIGATION AND CLAIMS. No litigation, claim, Investigation, administrative
      proceeding or similar action (including those for unpaid taxes) against
      Borrower is pending or threatened, and no other event has occurred which
      may materially adversely affect Borrower's financial condition or
      properties, other than litigation, claims, or other events, if any, that
      have been disclosed to and acknowledged by Lender in writing.

      TAXES. To the best of Borrower's knowledge, all of Borrower's tax returns
      and reports that are or were required to be filed, have been filed, and
      all taxes, assessments and other governmental charges have been paid in
      full except those presently being or to be contested by Borrower in good
      faith in the ordinary course of business and for which adequate reserves
      have been provided.

      LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
      Borrower has not entered into or granted any Security Agreements, or
      permitted the filing or attachment of any Security interests on or
      effecting any of the Collateral directly or indirectly securing repayment
      of Borrower's Loan and Note, that would be prior or that may in any way be
      superior to Lender's Security Interests and rights in and to such
      Collateral.

      BINDING EFFECT. This Agreement, the Note, all Security Agreements (if
      any), and all Related Documents are binding upon the signers thereof, as
      well as upon their successors, representatives and assigns, and are
      legally enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect. Borrower will:

      NOTICES OF CLAIMS AND LITIGATION. Promptly inform Lender in writing of (1)
      all material adverse changes in Borrower's financial condition, and (2)
      all existing and all threatened litigation, claims, investigations,
      administrative proceedings or similar actions affecting Borrower or any
      Guarantor which could materially affect the financial condition of
      Borrower or the financial condition of any Guarantor.

      FINANCIAL RECORDS. Maintain its books and records in accordance with GAAP,
      applied on a consistent basis, and permit Lender to examine and audit
      Borrower's books and records at all reasonable times.

      FINANCIAL STATEMENTS. Furnish Lender with the following:

            ANNUAL STATEMENTS. As soon as available, but in no event later than
            one-hundred-twenty (120) days after the and of each fiscal year,
            Borrower's balance sheet and income statement for the year ended.
            audited by a certified public accountant satisfactory to Lender.

            INTERIM STATEMENTS. As soon as available, but in no event later than
            SIXTY (60) days after the end of each fiscal quarter, Borrower's
            balance sheet and profit and loss statement for the period ended,
            prepared by Borrower.

All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent

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                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                  (CONTINUED)                             PAGE 4

basis, and certified by Borrower is being true and correct.

ADDITIONAL INFORMATION. Furnish such additional information and statements, as
Lender may request from time to time.

FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios:

      WORKING CAPITAL REQUIREMENTS. Borrower shall comply with the following
      working capital ratio requirements:

            CURRENT RATIO. Maintain a Current Ratio in excess of 2.000 to 1.000.
            The term "Current Ratio" means Borrower's total Current Assets
            divided by Borrower's total Current Liabilities. This liquidity
            ratio will be evaluated as of quarter-end.

      TANGIBLE NET WORTH REQUIREMENTS. Borrower shall comply with the following
      net worth ratio requirements:

            DEBT / WORTH RATIO. Maintain a ratio of Debt / Worth not in excess
            of 2.500 to 1.000. The ratio "Debt / Worth" means Borrower's Total
            Liabilities divided by Borrower's Tangible Net Worth. This leverage
            ratio will be evaluated as of quarter-end.

      Except as provided above, all computations made to determine compliance
      with the requirements contained in this paragraph shall be made in
      accordance with generally accepted accounting principles, applied on a
      consistent basis, and certified by Borrower as being true and correct.

INSURANCE. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, and coverages reasonably acceptable
to Lender and by insurance companies authorized to transact business in Texas.
BORROWER MAY FURNISH THE INSURANCE REQUIRED BY THIS AGREEMENT WHETHER THROUGH
EXISTING POLICIES OWNED OR CONTROLLED BY BORROWER OR THROUGH EQUIVALENT COVERAGE
FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS. Borrower,
upon request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lander, including stipulations
that coverages will not be cancelled or diminished without at least ten (10)
days prior written notice to Lender. Each Insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans. Borrower will provide Lender with such
lender's loss payable or other endorsements as Lender may require.

INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without  limitation the following: (1) The name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.

GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantors named
below, on Lender's forms, and in the amounts and under the conditions set forth
in those guaranties.

<TABLE>
<CAPTION>
Names of Guarantors               Amount
-------------------               ------
<S>                               <C>
Craftmade International, Inc.     50.000% of all Indebtedness or $1,000,000.00, whichever is less
DOLAN NORTHWEST, LLC              50.000% of all Indebtedness or $1,000,000.00, whichever is less
</TABLE>

OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.

LOAN PROCEEDS. Use all Loan proceeds solely for the following specific purposes:
REVOLVING LINE OF CREDIT TO SUPPORT ACCOUNTS RECEIVABLE AND/OR INVENTORY.

TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits.

PERFORMANCE. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.

OPERATIONS. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner.

ENVIRONMENTAL STUDIES. Promptly conduct and complete, at Borrower's expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.

COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower's properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lender's sole opinion, Lender's
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lender's interest,

INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.

COMPLIANCE CERTIFICATES. Unless waived in writing by Lender, provide Lender
within thirty (30) days after the end of each month, with a certificate executed
by Borrower's chief financial officer, or other officer or person acceptable
to Lender, certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further
certifying that, as of the date of

<PAGE>

                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                  (CONTINUED)                             PAGE 5

      the certificate, no Event of Default exists under this Agreement.

      ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
      respects with any and all Environmental Laws; not cause or permit to
      exist, as a result of an intentional or unintentional action or omission
      on Borrower's part or on the part of any third party, on property owned
      and/or occupied by Borrower, any environmental activity where damage may
      result to the environment, unless such environmental activity is
      pursuant to and in compliance with the conditions of a permit issued by
      the appropriate federal, state or local governmental authorities: shall
      furnish to Lender promptly and in any event within thirty (30) days after
      receipt thereof a copy of any notice, summons, lien, citation, directive,
      letter or other communication from any governmental agency or
      instrumentality concerning any intentional or unintentional action or
      omission on Borrower's part in connection with any environmental activity
      whether or not there is damage to the environment and/or other natural
      resources.

      ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
      notes, mortgages, deeds of trust, security agreements, assignments,
      financing statements, instruments, documents and other agreements as
      Lender or its attorneys may reasonably request to evidence and secure the
      Loans and to perfect all Security Interests.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's Interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures paid by Lender for such purposes will then bear interest at the
Note rate from the date paid by Lender to the date of repayment by Borrower. To
the extent permitted by applicable law, all such expenses will become a part of
the indebtedness and, at Lender's option, will (A) be payable on demand; (B) be
added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:

      INDEBTEDNESS AND LIENS. (1) Except for trade debt incurred in the normal
      course of business and indebtedness to Lender contemplated by this
      Agreement, create, incur or assume indebtedness for borrowed money,
      including capital leases, (2) sell, transfer, mortgage, assign, pledge,
      lease, grant a security interest in, or encumber any of Borrower's assets
      (except as allowed as Permitted Liens), or (3) sell with recourse any of
      Borrower's accounts, except to Lender.

      CONTINUITY OF OPERATIONS. (1) Engage in any business activities
      substantially different than those in which Borrower is presently engaged,
      (2) cease operations, liquidate, merge, transfer, acquire or consolidate
      with any other entity, change its name, dissolve or transfer or sell
      Collateral out of the ordinary course of business, or (3) make any
      distribution with respect to any capital account, whether by reduction of
      capital or otherwise.

      LOANS, ACQUISITIONS AND GUARANTIES. (1) Loan, invest in or advance money
      or assets to any other person, enterprise or entity, (2) purchase, create
      or acquire any interest in any other enterprise or entity, or (3) incur
      any obligation as surety or guarantor other than in the ordinary course of
      business.

      AGREEMENTS. Borrower will not enter into any agreement containing any
      provisions which would be violated or breached by the performance of
      Borrower's obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

      PAYMENT DEFAULT. Borrower fails to make any payment when due under the
      Loan.

      OTHER DEFAULTS. Borrower fails to comply with or to perform any other
      term, obligation, covenant or condition contained in this Agreement or in
      any of the Related Documents or to comply with or to perform any term,
      obligation, covenant or condition contained in any other agreement between
      Lender and Borrower.

      DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
      any loan, extension of credit, security agreement, purchase or sales
      agreement, or any other agreement, in favor of any other creditor or
      person that may materially affect any of Borrower's or any Grantor's
      property or Borrower's or any Grantor's ability to repay the Loans or
      perform their respective obligations under this Agreement or any of the
      Related Documents.

      FALSE STATEMENTS. Any warranty, representation or statement made or
      furnished to Lender by Borrower or on Borrower's behalf under this
      Agreement or the Related Documents is false or misleading in any material
      respect, either now or at the time made or furnished or becomes false or
      misleading at any time thereafter.

      DEATH OR INSOLVENCY. The dissolution of Borrower (regardless of whether
      election to continue is made), any member withdraws from Borrower, or any
      other termination of Borrower's existence as a going business or the
      death of any member, the insolvency of Borrower, the appointment of a
      receiver for any part of Borrower's property, any assignment for the
      benefit of creditors, any type of creditor workout, or the commencement
      of any proceeding under any bankruptcy or insolvency laws by or against
      Borrower.

      DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
      Documents ceases to be in full force and effect (including failure of any
      collateral document to create a valid and perfected security interest or
      lien) at any time and for any reason.

<PAGE>

                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                  (CONTINUED)                             PAGE 6

      CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
      forfeiture proceedings, whether by judicial proceeding, self-help,
      repossession or any other method, by any creditor of Borrower or by any
      governmental agency against any collateral securing the Loan. This
      includes a garnishment of any of Borrower's accounts, including deposit
      accounts, with Lender. However, this Event of Default shall not apply if
      there is a good faith dispute by Borrower as to the validity or
      reasonableness of the claim which is the basis of the creditor or
      forfeiture proceeding and if Borrower gives Lender written notice of the
      creditor or forfeiture proceeding and deposits with Lender monies or a
      surety bond for the creditor or forfeiture proceeding, in an amount
      determined by Lender, in its sole discretion, as being an adequate
      reserve or bond for the dispute.

      EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
      respect to any Guarantor of any of the Indebtedness or any Guarantor dies
      or becomes incompetent, or revokes or disputes the validity of, or
      liability under, any Guaranty of the Indebtedness.

      ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
      condition, or Lender believes the prospect of payment or performance of
      the Loan is impaired.

      INSECURITY. Lender in good faith believes itself insecure.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default end to exercise its rights and remedies.

WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.

FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document is transmitted by facsimile machine ("fax"), it
shall be treated for all purposes as an original document. Additionally, the
signature of any party on this document transmitted by way of a fax machine
shall be considered for all purposes as an original signature. Any such faxed
document shall be considered to have the same binding legal effect as an
original document. At the request of any party, any faxed document shall be
re-executed by each signatory party in an original form.

BORROWING BASE CERTIFICATES AND ACCOUNTS RECEIVABLE AGING REPORTS. Borrower
shall furnish to Lender monthly borrowing base certificates and an aging of
trade accounts receivable within thirty (30) days after the end of each month.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

      AMENDMENTS. This Agreement, together with any Related Documents,
      constitutes the entire understanding and agreement of the parties as to
      the matters set forth in this Agreement. No alteration of or amendment to
      this Agreement shall be effective unless given in writing and signed by
      the party or parties sought to be charged or bound by the alteration or
      amendment.

      ATTORNEYS' FEES: EXPENSES. Borrower agrees to pay upon demand all of
      Lender's costs and expenses, including Lender's reasonable attorneys' fees
      and Lender's legal expenses, incurred in connection with the enforcement
      of this Agreement. Lender may hire or pay someone else to help enforce
      this Agreement, and Borrower shall pay the costs and expenses of such
      enforcement. Costs and expenses include Lender's reasonable attorneys'
      fees and legal expenses whether or not there is a lawsuit, including
      Lender's reasonable attorneys' fees and legal expenses for bankruptcy
      proceedings (including efforts to modify or vacate any automatic stay or
      injunction), appeals, and any anticipated post-judgment collection
      services. Borrower also shall pay all court costs and such additional fees
      as may be directed by the court.

      CAPTION HEADINGS. Caption headings in this Agreement are for convenience
      purposes only and are not to be used to interpret or define the
      provisions of this Agreement.

      CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
      sale or transfer, whether now or later, of one or more participation
      interests in the Loan to one or more purchasers, whether related or
      unrelated to Lender. Lender may provide, without any limitation
      whatsoever, to any one or more purchasers, or potential purchasers, any
      information or knowledge Lender may have about Borrower or about any other
      matter relating to the Loan, and Borrower hereby waives any rights to
      privacy Borrower may have with respect to such matters. Borrower
      additionally waives any and all notices of sale of participation
      interests, as well as all notices of any repurchase of such participation
      interests. Borrower also agrees that the purchasers of any such
      participation interests will be considered as the absolute owners of such
      interests in the Loan and will have all the rights granted under the
      participation agreement or agreements governing the sale of such
      participation interests. Borrower further waives all rights of offset or
      counterclaim that it may have now or later against Lender or against any
      purchaser of such a participation interest and unconditionally agrees that
      either Lender or such purchaser may enforce Borrower's obligation under
      the Loan irrespective of the failure or insolvency of any holder of any
      interest in the Loan. Borrower further agrees that the purchaser of any
      such participation interests may enforce its interests irrespective of any
      personal claims or defenses that Borrower may have against Lender.

      GOVERNING LAW. This Agreement will be governed by, construed and enforced
      in accordance with federal law and the laws of the State of Texas. This
      Agreement has been accepted by Lender in the State of Texas.

      CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
      by this Agreement occurred in BEXAR County, Borrower agrees upon Lender's
      request to submit to the jurisdiction of the courts of BEXAR County, State
      of Texas.

      NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
      under this Agreement unless such waiver is given in writing and signed by
      Lender. No delay or omission on the part of Lender in exercising any right
      shall operate as a waiver of such right or any other right. A waiver by
      Lender of a provision of this Agreement shall not prejudice or constitute
      a waiver of Lender's right otherwise to demand strict compliance with that
      provision or any other provision of this Agreement. No prior waiver by
      Lender, nor any course of dealing between Lender and Borrower, or
      between Lender and any Grantor, shall constitute a waiver of any of
      Lender's rights or of any of Borrower's or any Grantor's obligations as
      to any future transactions. Whenever the consent of Lender is required
      under this Agreement, the granting of such consent by under in any
      instance shall not constitute continuing consent to subsequent instances
      where such consent is required and in all cases such consent may be
      granted or withheld in the sols discretion of Lender.

<PAGE>

                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                 (CONTINUED)                              PAGE 7

      NOTICES. Any notice required to be given under this Agreement shall be
      given in writing, and shall be effective when actually delivered, when
      actually received by telefacsimile (unless otherwise required by law),
      when deposited with a nationally recognized overnight courier, or, if
      mailed, when deposited in the United States mail, as first class,
      certified or registered mail postage prepaid, directed to the addresses
      shown near the beginning of this Agreement. Any party may change its
      address for notices under this Agreement by giving formal written notice
      to the other parties, specifying that the purpose of the notice is to
      change the party's address. For notice purposes, Borrower agrees to keep
      Lender informed at all times of Borrower's current address. Unless
      otherwise provided or required by law, if there is more than one Borrower,
      any notice given by Lender to any Borrower is deemed to be notice given to
      all Borrowers.

      PAYMENT OF INTEREST AND FEES. Notwithstanding any other provision of this
      Agreement or any provision of any Related Document. Borrower does not
      agree or intend to pay, and Lender does not agree or intend to charge,
      collect, take, reserve or receive (collectively referred to herein as
      "charge or collect"), any amount in the nature of interest or in the
      nature of a fee for the Loan which would in any way or event (including
      demand, prepayment, or acceleration) cause Lender to contract for, charge
      or collect more for the Loan than the maximum Lender would be permitted to
      charge or collect by any applicable federal or Texas state law. Any such
      excess interest or unauthorized fee will, instead of anything stated to
      the contrary, be applied first to reduce the unpaid principal balance of
      the Loan, and when the principal has been paid in full, be refunded to
      Borrower.

      SEVERABILITY. If a court of competent jurisdiction finds any provision of
      this Agreement to be illegal, invalid, or unenforceable as to any
      circumstance, that finding shall not make the offending provision illegal,
      invalid, or unenforceable as to any other circumstance. If feasible, the
      offending provision shall be considered modified so that it becomes
      legal, valid and enforceable. If the offending provision cannot be so
      modified, it shall be considered deleted from this Agreement. Unless
      otherwise required by law, the illegality, invalidity, or
      unenforceability of any provision of this Agreement shall not affect the
      legality, validity or enforceability of any other provision of this
      Agreement.

      SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
      any provisions of this Agreement makes it appropriate, including without
      limitation any representation, warranty or covenant, the word "Borrower"
      as used in this Agreement shall include all of Borrower's subsidiaries
      and affiliates. Notwithstanding the foregoing however, under no
      circumstances shall this Agreement be construed to require Lender to make
      any Loan or other financial accommodation to any of Borrower's
      subsidiaries or affiliates.

      SUCCESSORS AND ASSIGNS. All covenants and agreements by or on behalf of
      Borrower contained in this Agreement or any Related Documents shall bind
      Borrower's successors and assigns and shall inure to the benefit of Lender
      and its successors and assigns. Borrower shall not, however, have the
      right to assign Borrower's rights under this Agreement or any interest
      therein, without the prior written consent of Lender.

      SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
      agrees that in extending Loan Advances, Lender is relying on all
      representations, warranties, and covenants made by Borrower in this
      Agreement or in any certificate or other instrument delivered by Borrower
      to Lender under this Agreement or the Related Documents. Borrower further
      agrees that regardless of any investigation made by Lender, all such
      representations, warranties and covenants will survive the extension of
      Loan Advances and delivery to Lender of the Related Documents, shall be
      continuing in nature, shall be deemed made and related by Borrower at the
      time each Loan Advance is made, and shall remain in full force and effect
      until such time as Borrower's Indebtedness shall be paid in full, or until
      this Agreement shall be terminated in the manner provided above, whichever
      is the last to occur.

      TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
      Agreement.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:

      ACCOUNT. The word "Account" means a trade account, account receivable,
      other receivable, or other right to payment for goods sold or services
      rendered owing to Borrower (or to a third party grantor acceptable to
      Lender).

      ADVANCE. The word "Advance" means a disbursement of Loan funds made, or to
      be made, to Borrower or on Borrower's behalf under the terms and
      conditions of this Agreement.

      AGREEMENT. The word "Agreement" means this Business Loan Agreement (Asset
      Based), as this Business Loan Agreement (Asset Based) may be amended or
      modified from time to time, together with all exhibits and schedules
      attached to this Business Loan Agreement (Asset Based) from time to time.

      BORROWER. The word "Borrower" means Design Trends, LLC and includes all
      co-signers and co-makers signing the Note.

      BORROWING BASE. The words "Borrowing Base" mean, as determined by Lender
      from time to time, the lesser of (a) $2,000,000.00; or (b) the sum of (i)
      80.000% of the aggregate amount of Eligible Accounts; plus (ii) 50,000% of
      the aggregate amount of Eligible Inventory. No more than 50,000% of the
      Borrowing Base shall be supported by Eligible Inventory.

      BUSINESS DAY. The words "Business Day" mean a day on which commercial
      banks are open in the State of Texas.

      COLLATERAL. The word "Collateral" means all property and assets granted as
      collateral security for a Loan, whether real or personal property, whether
      granted directly or indirectly, whether granted now or in the future, and
      whether granted in the form of a security interest, mortgage, collateral
      mortgage, deed of trust, assignment, pledge, crop pledge, chattel
      mortgage, collateral chattel mortgage, chattel trust, factor's lien,
      equipment trust, conditional sale, trust receipt, lien, charge, lien or
      title retention contract, lease or consignment intended as a security
      device, or any other security or lien interest whatsoever, whether created
      by law, contract, or otherwise. The word Collateral also includes without
      limitation all collateral described in the Collateral section of this
      Agreement.

      ELIGIBLE ACCOUNTS. The words "Eligible Accounts' mean at any time, all of
      Borrower's Accounts which contain selling terms and conditions acceptable
      to Lender. The net amount of any Eligible Account against which Borrower
      may borrow shall exclude all returns, discounts, credits, and offsets of
      any nature. Unless otherwise agreed to by Lender in writing, Eligible
      Accounts do not include:

            (1) Accounts with respect to which the Account Debtor is a member,
            employee or agent of Borrower.

            (2) Accounts with respect to which the Account Debtor is affiliated
            with Borrower.

            (3) Accounts with respect to which goods are placed on consignment,
            guaranteed sale, or other terms by reason of which the payment by
            the Account Debtor may be conditional.

            (4) Accounts with respect to which the Account Debtor is not a
            resident of the United States, except to the extent such Accounts
            are

<PAGE>

                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                  (CONTINUED)                             PAGE 8

      Supported by insurance, bonds or other assurances satisfactory to Lender.

      (5) Accounts with respect to which Borrower is or may become liable to the
      Account Debtor for goods sold or services rendered by the Account Debtor
      to Borrower.

      (6) Accounts which are subject to dispute, counterclaim, or setoff.

      (7) Accounts with respect to which the goods have not been shipped or
      delivered, or the services have not been rendered, to the Account Debtor.

      (8) Accounts with respect to which Lender, in its sole discretion, deems
      the creditworthiness or financial condition of the Account Debtor to be
      unsatisfactory.

      (9) Accounts of any Account Debtor who has filed or has had filed against
      it a petition in bankruptcy or an application for relief under any
      provision of any state or federal bankruptcy, insolvency, or
      debtor-in-relief acts; or who has had appointed a trustee, custodian, or
      receiver for the assets of such Account Debtor; or who has made an
      assignment for the benefit of creditors or has become insolvent or fails
      generally to pay its debts (including its payrolls) as such debts become
      due.

      (10) Accounts with respect to which the Account Debtor is the United
      States government or any department or agency of the United States.

      (11) Accounts which have not been paid in full within 60 days from the
      invoice date. The entire balance of any Account of any single Account
      Debtor will be ineligible whenever the portion of the Account which has
      not been paid within 60 days from the invoice date is in excess of 20.000%
      of the total amount outstanding on the Account.

ELIGIBLE INVENTORY, The words "Eligible Inventory" mean at any time, all of
Borrower's Inventory as defined below except:

      (1) Inventory which is not owned by Borrower free and clear of all
      security interests, liens, encumbrances, and claims of third parties.

      (2) Inventory which Lender, in its sole discretion, deems to be obsolete,
      unsalable damaged, defective, or unfit for further processing.

ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), The Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No, 99-499 ("SARA"), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et., seq., or
other applicable state or federal laws, rules, or regulations adopted pursuant
thereto.

EVENT OF DEFAULT. The words "Event of Default" mean any of the events of default
set forth in this Agreement in the default section of this Agreement.

EXPIRATION DATE. The words "Expiration Date" mean the date of termination of
Lender's commitment to lend under this Agreement.

GAAP. The word "GAAP" means generally accepted accounting principles.

GRANTOR. The word "Grantor" means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including without
limitation all Borrowers granting such a Security Interest.

GUARANTOR. The word "Guarantor" means any Guarantor, surety, or accommodation
party of any or all of the Loan.

GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.

HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human
health or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words "Hazardous
Substances" are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances" also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.

INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.

INVENTORY. The word "inventory" means all of Borrower's raw materials, work in
process, finished goods, merchandise, parts and supplies, of every kind and
description, and goods held for sale or lease or furnished under contracts of
service in which Borrower now has or hereafter acquires any right, whether held
by Borrower or others, and all documents of title, warehouse receipts, bills of
lading, and all other documents of every type covering all or any part of the
foregoing. Inventory includes inventory temporarily out of Borrower's custody
or possession and all returns on Accounts.

LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors and
assigns.

LOAN. The word "Loan" means any and all loans and financial accommodations from
Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to this Agreement from
time to time.

NOTE. The word "Note" means the Note executed by Design Trends, LLC in the
principal amount of $2,000,000.00 dated June 14, 2004, together with all
renewals of, extensions of, modifications of, refinancings of consolidations
of, and substitutions for the note or credit agreement.

PERMITTED LIENS. The words "Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4) purchase money liens or purchase money
security interests upon or in any property acquired or hold by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (6) those liens and security interests which in the aggregate
constitute

<PAGE>

                      BUSINESS LOAN AGREEMENT (ASSET BASED)
                                  (CONTINUED)                             PAGE 9

      an immaterial and insignificant monetary amount with respect to the net
      value of Borrower's assets.

      PRIMARY CREDIT FACILITY. The words "Primary Credit Facility" mean the
      credit facility described in the Line of Credit section of this Agreement.

      RELATED DOCUMENTS. The words "Related Documents" mean all promissory
      notes, credit agreements, loan agreements, environmental agreements,
      guaranties, security agreements, mortgages, deads of trust, security
      deeds, collateral mortgages, and all other instruments, agreements and
      documents, whether now or hereafter existing, executed in connection with
      the Loan.

      SECURITY AGREEMENT. The words "Security Agreement" mean and include
      without limitation any agreements, promises, covenants, arrangements,
      understandings or other agreements, whether created by law, contract, or
      otherwise, evidencing, governing, representing, or creating a Security
      Interest.

      SECURITY INTEREST. The words "Security Interest" mean, without
      limitation, any and all types of collateral security, present and future,
      whether in the form of a lien, charge, encumbrance, mortgage, deed of
      trust, security dead, assignment, pledge, crop pledge, chattel mortgage,
      collateral chattel mortgage, chattel trust, factor's lien, equipment
      trust, conditional sale, trust receipt, lien or title retention contract,
      lease or consignment intended as a security device, or any other security
      or lien interest whatsoever whether created by law, contract, or
      otherwise.

      TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
      assets excluding all intangible assets (i.e., goodwill, trademarks,
      patents, copyrights, organizational expenses, and similar intangible
      items, but including leaseholds and leasehold Improvements) less total
      debt.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED)AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS
LOAN AGREEMENT (ASSET BASED) IS DATED JUNE 14, 2004.

BORROWER:

DESIGN TRENDS, LLC

CRAFTMADE INTERNATIONAL, INC. Manager of Design Trends, LLC

By: /s/ James R. Ridings
    ------------------------------------------
    JAMES R. RIDINGS, President of Craftmade
    International, Inc.

LENDER:

THE FROST NATIONAL BANK

By: /s/ D. Michael Randall
    ------------------------------------------
    Authorized Signer


<PAGE>

[LOGO]

                                PROMISSORY NOTE

<TABLE>
<CAPTION>
  PRINCIPAL    LOAN DATE  MATURITY  LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
<S>           <C>        <C>        <C>     <C>       <C>     <C>     <C>
$2,000,000.00 06-14-2004 10-31-2005 9001              3560802  146
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.

BORROWER: DESIGN TRENDS, LLC (TIN: 75-2841381)   LENDER: THE FROST NATIONAL BANK
          P.O. BOX 1037                                  HULEN FINANCIAL CENTER
          COPPELL, TX 75019                              P.O. BOX 1600
                                                         SAN ANTONIO. TX 78296

Principal Amount: $2,000,000.00 Initial Rate: 4.000% Date of Note: June 14, 2004

PROMISE TO PAY. DESIGN TRENDS, LLC ("BORROWER") PROMISES TO PAY TO THE FROST
NATIONAL BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF TWO MILLION & 00/100 DOLLARS ($2,000,000.00) OR
SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING
PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF
EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE OR MATURITY, WHICHEVER OCCURS
FIRST.

CHOICE OF USURY CEILING AND INTEREST RATE. The interest rate on this Note has
been implemented under the "Weekly Ceiling" as referred to in Sections 303.002
and 303.003 of the Texas Finance Code. The terms, including the rate, or index,
formula, or provision of law used to compute the rate on the Note, will be
subject to revision as to current and future balances, from time to time by
notice from Lender in compliance with Section 303.103 of the Texas Finance Code.

PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON OCTOBER 31, 2005. IN ADDITION, BORROWER WILL
PAY REGULAR MONTHLY PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF EACH
PAYMENT DATE, BEGINNING JULY 31, 2004, WITH ALL SUBSEQUENT INTEREST PAYMENTS TO
BE DUE ON THE LAST DAY OF EACH MONTH AFTER THAT. UNLESS OTHERWISE AGREED OR
REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST TO ANY UNPAID
COLLECTION COSTS; THEN TO ANY LATE CHARGES; THEN TO ANY ACCRUED UNPAID INTEREST;
AND THAN TO PRINCIPAL. THE ANNUAL INTEREST RATE FOR THIS NOTE IS COMPUTED ON A
365/360 BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL INTEREST RATE OVER A
YEAR OF 360 DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL BALANCE, MULTIPLIED BY
THE ACTUAL NUMBER OF DAYS THE PRINCIPAL BALANCE IS OUTSTANDING, UNLESS SUCH
CALCULATION WOULD RESULT IN A USURIOUS RATE, IN WHICH CASE INTEREST SHALL BE
CALCULATED ON A PER DIEM BASIS OF A YEAR OF 365 OR 366 DAYS, AS THE CASE MAY BE.
BORROWER WILL PAY LENDER AT LENDER'S ADDRESS SHOWN ABOVE OR AT SUCH OTHER PLACE
AS LENDER MAY DESIGNATE IN WRITING.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. The interest rate
change will not occur more often than each day. Borrower understands that Lender
may make loans based on other rates as well. THE INDEX CURRENTLY IS 4.000% PER
ANNUM. THE INTEREST RATE TO BE APPLIED PRIOR TO MATURITY TO THE UNPAID PRINCIPAL
BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN
INITIAL RATE OF 4.000% PER ANNUM. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law. For purposes of this Note, the "maximum rate allowed by applicable law"
means the greater of (A) the maximum rate of interest permitted under federal or
other law applicable to the indebtedness evidenced by this Note, or (B) the
"Weekly Ceiling" as referred to in Sections 303.002 and 303.003 of the Texas
Finance Code.

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Prepayment in full shall consist of payment of the
remaining unpaid principal balance together with all accrued and unpaid interest
and all other amounts, costs and expenses for which Borrower is responsible
under this Note or any other agreement with Lender pertaining to this loan, and
in no event will Borrower ever be required to pay any unearned interest. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: THE FROST NATIONAL BANK,
P.O. BOX 1600 SAN ANTONIO, TX 78296.

LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $250.00,
whichever is less.

POST MATURITY RATE. The Post Maturity Rate on this Note is the lesser of the
maximum rate allowed by applicable law or 18.000% per annum. Borrower will pay
interest on all sums due after Final maturity, whether by acceleration or
otherwise, at that rate.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

      PAYMENT DEFAULT. Borrower fails to make any payment when due under this
      Note.

      OTHER DEFAULTS. Borrower fails to comply with or to perform any other
      term, obligation, covenant or condition contained in this Note or in any
      of the related documents or to comply with or to perform any term,
      obligation, covenant or condition contained in any other agreement between
      Lender and Borrower.

      DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
      any loan, extension of credit, security agreement, purchase or sales
      agreement, or any other agreement, in favor of any other creditor or
      person that may materially affect any of Borrower's property or Borrower's
      ability to repay this Note or perform Borrower's obligations under this
      Note or any of the related documents.

      FALSE STATEMENTS. Any warranty, representation or statement made or
      furnished to Lender by Borrower or on Borrower's behalf under this Note or
      the related documents is false or misleading in any material respect,
      either now or at the time made or furnished or becomes false or misleading
      at any time thereafter.

<PAGE>

                                 PROMISSORY NOTE
                                   (CONTINUED)                            PAGE 2

      DEATH OR INSOLVENCY. The dissolution of Borrower (regardless of whether
      election to continue is made), any member withdraws from Borrower, or any
      other termination of Borrower's existence as a going business or the death
      of any member, the insolvency of Borrower, the appointment of a receiver
      for any part of Borrower's property, any assignment for the benefit of
      creditors, any type of creditor workout, or the commencement of any
      proceeding under any bankruptcy or insolvency laws by or against Borrower.

      CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
      forfeiture proceedings, whether by judicial proceeding, self-help,
      repossession or any other method, by any creditor of Borrower or by any
      governmental agency against any collateral securing the loan. This
      includes a garnishment of any of Borrower's accounts, including deposit
      accounts, with Lender. However, this Event of Default shall not apply if
      there is a good faith dispute by Borrower as to the validity or
      reasonableness of the claim which is the basis of the creditor or
      forfeiture proceeding and if Borrower gives Lender written notice of the
      creditor or forfeiture proceeding and deposits with Lender monies or a
      surety bond for the creditor or forfeiture proceeding, in an amount
      determined by Lender, in its sole discretion, as being an adequate reserve
      or bond for the dispute.

      EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
      respect to any Guarantor of any of the indebtedness or any Guarantor dies
      or becomes incompetent, or revokes or disputes the validity of, or
      liability under, any guaranty of the indebtedness evidenced by this Note.

      ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
      condition, or Lender believes the prospect of payment or performance of
      this Note is impaired.

      INSECURITY. Lender in good faith believes itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount.

ATTORNEYS' FEES; EXPENSES. Lender may hire an attorney to help collect this Note
if Borrower does not pay, and Borrower will pay Lender's reasonable attorneys'
fees. Borrower also will pay Lender all other amounts Lender actually incurs as
court costs, lawful fees for filing, recording, releasing to any public office
any instrument securing this Note; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor vehicle
offered as security for this Note, or premiums or identifiable charges received
in connection with the sale of authorized insurance.

GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF TEXAS. THIS NOTE HAS
BEEN ACCEPTED BY LENDER IN THE STATE OF TEXAS.

CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced by this
Note occurred in BEXAR County, Borrower agrees upon Lender's request to submit
to the jurisdiction of the courts of BEXAR County, State of Texas.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (A) advanced in accordance
with the instructions of an authorized person or (B) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (A) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (B) Borrower or any guarantor ceases doing business or is
insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (D) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (E) Lender in good faith
believes itself insecure. This revolving line of credit shall not be subject to
Ch. 346 of the Texas Finance Code.

OTHER CREDITS AFFECTING AVAILABILITY. Any other credits made available to
Borrower by Lender, such as other loans or letters of credit, may be advanced to
Borrower and/or issued under this line of credit commitment, and any such
advances or issuances shall, in addition to the outstanding advances on this
Note, reduce the outstanding availability on the Line of Credit.

DISHONORED CHECK CHARGE. In the event a check offered in full or partial payment
on this loan is returned unpaid, Lender may charge a fee for the purpose of
defraying the expense incident, to handling such returned check, and Borrower
agrees to pay such fee. The fee shall not exceed the maximum amount permitted
under applicable law.

FINANCIAL INFORMATION. Borrower agrees to promptly furnish and cause any other
person who signs, guarantees or endorses this Note or any other document
executed in connection with this Note, to furnish such financial information and
statements, including financial statements in a format acceptable to Lender,
lists of assets and liabilities, agings of receivables and payable, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's or such person's financial condition and business operations as
Lender may request from time to time. This provision shall not after the
obligation to deliver to Lender any other financial statements or reports
pursuant to the terms of any other loan documents executed in connection with
this Note.

INSURANCE. Borrower agrees to maintain insurance of such types, including public
liability insurance, and in such amounts as are satisfactory to Lender and to
furnish Lender upon request with a detailed list, in form and substance
satisfactory to Lender, of all insurance then in effect.

FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document is transmitted by facsimile machine ("fax"), it
shall be treated for all purposes as an original document. Additionally, the
signature of any party on this document transmitted by way of a fax machine
shall be considered for all purposes as an original signature. Any such faxed
document shall be considered to have the same binding legal effect as an
original document. Upon request of Lender, any faxed document shall be
re-executed by each signatory party in an original form.

WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.

<PAGE>

                                 PROMISSORY NOTE
                                   (CONTINUED)                            PAGE 3

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Texas
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. The right to accelerate maturity of sums due under this Note does
not include the right to accelerate any interest which has not otherwise accrued
on the date of such acceleration, and Lender does not intend to charge or
collect any unearned interest in the event of acceleration. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the loan evidenced by
this Note until payment in full so that the rate or amount of interest on
account of the loan evidenced hereby does not exceed the applicable usury
ceiling. Lender may delay or forgo enforcing any of its rights or remedies under
this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, notice of dishonor, notice of intent to
accelerate the maturity of this Note, and notice of acceleration of the maturity
of this Note. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

DESIGN TRENDS, LLC

CRAFTMADE INTERNATIONAL, INC., MANAGER OF DESIGN TRENDS, LLC

BY: /s/ JAMES R. RIDINGS
    ------------------------------------------------
    JAMES R. RIDINGS, PRESIDENT OF CRAFTMADE
    INTERNATIONAL, INC.

<PAGE>

[LOGO]

                                 COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
  PRINCIPAL    LOAN DATE  MATURITY  LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
<C>           <C>        <C>        <C>     <C>       <C>     <C>     <C>
$2,000,000.00 06-14-2004 10-31-2005  9001             3560802  146
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.

GRANTOR:  DESIGN TRENDS, LLC (TIN: 75-2841381)   LENDER: THE FROST NATIONAL BANK
          P.O. BOX 1037                                  HULEN FINANCIAL CENTER
          COPPELL, TX 75019                              P.O. BOX 1600
                                                         SAN ANTONIO, TX 78296

THIS COMMERCIAL SECURITY AGREEMENT DATED JUNE 14, 2004, IS MADE AND EXECUTED
BETWEEN DESIGN TRENDS, LLC ("GRANTOR") AND THE FROST NATIONAL BANK ("LENDER").

GRANT OF SECURITY INTEREST. FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER
A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT
LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE
COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

      ALL INVENTORY AND ACCOUNTS

In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

      (A) All accessions, attachments, accessories, tools, parts, supplies,
      replacements of and additions to any of the collateral described herein,
      whether added now or later.

      (B) All products and produce of any of the property described in this
      Collateral section.

      (C) All accounts, general intangibles, instruments, rents, monies,
      payments, and all other rights, arising out of a sale, lease, consignment
      or other disposition of any of the property described in this Collateral
      section.

      (D) All proceeds (including insurance proceeds) from the sale,
      destruction, loss, or other disposition of any of the property described
      in this Collateral section, and sums due from a third party who has
      damaged or destroyed the Collateral or from that party's insurer, whether
      due to judgment, settlement or other process.

      (E) All records and data relating to any of the property described in this
      Collateral section, whether in the form of a writing, photograph,
      microfilm, microfiche, or electronic media, together with all of Grantor's
      right, title, and interest in and to all computer software required to
      utilize, create, maintain, and process any such records or data on
      electronic media.

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Collateral unless and until
such a notice is given.

CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

      PERFECTION OF SECURITY INTEREST. Grantor agrees to execute financing
      statements and to take whatever other actions are requested by Lender to
      perfect and continue Lender's security interest in the Collateral. Upon
      request of Lender, Grantor will deliver to Lender any and all of the
      documents evidencing or constituting the Collateral, and Grantor will note
      Lender's interest upon any and all chattel paper if not delivered to
      Lender for possession by Lender. This is a continuing Security Agreement
      and will continue in effect even though all or any part of the
      Indebtedness is paid in full and even though for a period of time Grantor
      may not be indebted to Lender.

      NOTICES TO LENDER. Grantor will promptly notify Lender in writing at
      Lender's address shown above (or such other addresses as Lender may
      designate from time to time) prior to any (1) change in Grantor's name;
      (2) change in Grantor's assumed business name(s); (3) change in the
      management or in the members or managers of the limited liability company
      Grantor; (4) change in the authorized signer(s); (5) change in Grantor's
      principal office address; (6) change in Grantor's state of organization;
      (7) conversion of Grantor to a new or different type of business entity;
      or (8) change in any other aspect of Grantor that directly or indirectly
      relates to any agreements between Grantor and Lender. No change in
      Grantor's name or state of organization will take effect until after
      Lender has received notice.

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                  (CONTINUED)                             PAGE 2

      NO VIOLATION. The execution and delivery of this Agreement will not
      violate any law or agreement governing Grantor or to which Grantor is a
      party, and its membership agreement does not prohibit any term or
      condition of this Agreement.

      ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
      accounts, chattel paper, or general intangibles, as defined by the Uniform
      Commercial Code, the Collateral is enforceable in accordance with its
      terms, is genuine, and fully complies with all applicable laws and
      regulations concerning form, content and manner of preparation and
      execution, and all persons appearing to be obligated on the Collateral
      have authority and capacity to contract and are in fact obligated as they
      appear to be on the Collateral. At the time any Account becomes subject to
      a security interest in favor of Lender, the Account shall be a good and
      valid account representing an undisputed, bona fide indebtedness incurred
      by the account debtor, for merchandise held subject to delivery
      instructions or previously shipped or delivered pursuant to a contract of
      sale, or for services previously performed by Grantor with or for the
      account debtor. So long as this Agreement remains in effect, Grantor shall
      not, without Lender's prior written consent, compromise, settle, adjust,
      or extend payment under or with regard to any such Accounts. There shall
      be no setoffs or counterclaims against any of the Collateral, and no
      agreement shall have been made under which any deductions or discounts may
      be claimed concerning the Collateral except those disclosed to Lender in
      writing.

      LOCATION OF THE COLLATERAL. Except in the ordinary course of Grantor's
      business, Grantor agrees to keep the Collateral (or to the extent the
      Collateral consists of intangible property such as accounts or general
      intangibles, the records concerning the Collateral) at Grantor's address
      shown above or at such other locations as are acceptable to Lender. Upon
      Lender's request, Grantor will deliver to Lender in form satisfactory to
      Lender a schedule of real properties and Collateral locations relating to
      Grantor's operations, including without limitation the following: (1) all
      real property Grantor owns or is purchasing; (2) all real property Grantor
      is renting or leasing; (3) all storage facilities Grantor owns, rents,
      leases, or uses; and (4) all other properties where Collateral is or may
      be located.

      REMOVAL OF THE COLLATERAL. Except in the ordinary course of Grantor's
      business, including the sales of inventory, Grantor shall not remove the
      Collateral from its existing location without Lender's prior written
      consent. To the extent that the Collateral consists of vehicles, or other
      titled property, Grantor shall not take or permit any action which would
      require application for certificates of title for the vehicles outside the
      State of Delaware, without Lender's prior written consent. Grantor shall,
      whenever requested, advise Lender of the exact location of the Collateral.

      TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
      collected in the ordinary course of Grantor's business, or as otherwise
      provided for in this Agreement, Grantor shall not sell, offer to sell, or
      otherwise transfer or dispose of the Collateral. While Grantor is not in
      default under this Agreement, Grantor may sell inventory, but only in the
      ordinary course of its business and only to buyers who qualify as a buyer
      in the ordinary course of business. A sale in the ordinary course of
      Grantor's business does not include a transfer in partial or total
      satisfaction of a debt or any bulk sale. Grantor shall not pledge,
      mortgage, encumber or otherwise permit the Collateral to be subject to any
      lien, security interest, encumbrance, or charge, other than the security
      interest provided for in this Agreement, without the prior written consent
      of Lender. This includes security interests even if junior in right to the
      security interests granted under this Agreement. Unless waived by Lender,
      all proceeds from any disposition of the Collateral (for whatever reason)
      shall be held in trust for Lender and shall not be commingled with any
      other funds; provided however, this requirement shall not constitute
      consent by Lender to any sale or other disposition. Upon receipt, Grantor
      shall immediately deliver any such proceeds to Lender.

      TITLE. Grantor represents and warrants to Lender that Grantor holds good
      and marketable title to the Collateral, free and clear of all liens and
      encumbrances except for the lien of this Agreement. No financing statement
      covering any of the Collateral is on file in any public office other than
      those which reflect the security interest created by this Agreement or to
      which Lender has specifically consented. Grantor shall defend Lender's
      rights in the Collateral against the claims and demands of all other
      persons.

      REPAIRS AND MAINTENANCE. Grantor agrees to keep and maintain, and to cause
      others to keep and maintain, the Collateral in good order, repair and
      condition at all times while this Agreement remains in effect. Grantor
      further agrees to pay when due all claims for work done on, or services
      rendered or material furnished in connection with the Collateral so that
      no lien or encumbrance may ever attach to or be filed against the
      Collateral.

      INSPECTION OF COLLATERAL. Lender and Lender's designated representatives
      and agents shall have the right at all reasonable times to examine and
      inspect the Collateral wherever located.

      TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
      assessments and liens upon the Collateral, its use or operation, upon this
      Agreement, upon any promissory note or notes evidencing the Indebtedness,
      or upon any of the other Related Documents. Grantor may withhold any such
      payment or may elect to contest any lien if Grantor is in good faith
      conducting an appropriate proceeding to contest the obligation to pay and
      so long as Lender's interest in the Collateral is not jeopardized in
      Lender's sole opinion. In any contest Grantor shall defend itself and
      Lender and shall satisfy any final adverse judgment before enforcement
      against the Collateral. Grantor shall name Lender as an additional obligee
      under any surety bond furnished in the contest proceedings. Grantor
      further agrees to furnish Lender with evidence that such taxes,
      assessments, and governmental and other charges have been paid in full and
      in a timely manner. Grantor may withhold any such payment or may elect to
      contest any lien if Grantor is in good faith conducting an appropriate
      proceeding to contest the obligation to pay and so long as Lender's
      interest in the Collateral is not jeopardized.

      COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
      with all laws, ordinances, rules and regulations of all governmental
      authorities, now or hereafter in effect, applicable to the ownership,
      production, disposition, or use of the Collateral, including all laws or
      regulations relating to the undue erosion of highly-erodible land or
      relating to the conversion of wetlands for the production of an
      agricultural product or commodity. Grantor may contest in good faith any
      such law, ordinance or regulation and withhold compliance during any
      proceeding, including appropriate appeals, so long as Lender's interest in
      the Collateral, in Lender's opinion, is not jeopardized.

      HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
      never has been, and never will be so long as this Agreement remains a lien
      on the Collateral, used in violation of any Environmental Laws or for the
      generation, manufacture, storage, transportation, treatment, disposal,
      release or threatened release of any Hazardous Substance. The
      representations and warranties contained herein are based on Grantor's due
      diligence in investigating the Collateral for Hazardous Substances.
      Grantor hereby (1) releases and waives any future claims against Lender
      for indemnity or contribution in the event Grantor becomes liable for
      cleanup or other costs under any Environmental Laws, and (2) agrees to
      indemnify and hold harmless Lender against any and all claims and losses
      resulting from a breach of this provision of this Agreement. This
      obligation to indemnify shall survive the payment of the Indebtedness and
      the satisfaction of this Agreement.

      MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
      risks insurance, including without limitation fire, theft and liability
      coverage together with such other insurance as Lender may require with
      respect to the Collateral, in form, amounts, coverages and basis
      reasonably acceptable to Lender and issued by a company or companies
      reasonably acceptable to Lender. Grantor, upon request of Lender, will
      deliver to Lender from time to time the policies or certificates of
      insurance in form satisfactory to Lender, including stipulations that
      coverages will not be cancelled or diminished without at least ten (10)
      days' prior written notice to Lender and not including any disclaimer of
      the insurer's liability for failure to give such a notice. Each insurance
      policy also shall include an endorsement providing that

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                          COMMERCIAL SECURITY AGREEMENT
                                  (CONTINUED)                             PAGE 3

      coverage in favor of Lender will not be impaired in any way by any act,
      omission or default of Grantor or any other person. In connection with all
      policies covering assets in which Lender holds or is offered a security
      interest, Grantor will provide Lender with such loss payable or other
      endorsements as Lender may require. If Grantor at any time fails to obtain
      or maintain any insurance as required under this Agreement, Lender may
      (but shall not be obligated to) obtain such insurance as Lender deems
      appropriate, including if Lender so chooses "single interest insurance,"
      which will cover only Lender's interest in the Collateral.

      APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
      any loss or damage to the Collateral. Lender may make proof of loss if
      Grantor fails to do so within fifteen (15) days of the casualty. All
      proceeds of any insurance on the Collateral, including accrued proceeds
      thereon, shall be held by Lender as part of the Collateral. If Lender
      consents to repair or replacement of the damaged or destroyed Collateral,
      Lender shall, upon satisfactory proof of expenditure, pay or reimburse
      Grantor from the proceeds for the reasonable cost of repair or
      restoration. If Lender does not consent to repair or replacement of the
      Collateral, Lender shall retain a sufficient amount of the proceeds to pay
      all of the Indebtedness, and shall pay the balance to Grantor. Any
      proceeds which have not been disbursed within six (6) months after their
      receipt and which Grantor has not committed to the repair or restoration
      of the Collateral shall be used to prepay the Indebtedness.

      INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
      reserves for payment of insurance premiums, which reserves shall be
      created by monthly payments from Grantor of a sum estimated by Lender to
      be sufficient to produce, at least fifteen (15) days before the premium
      due date, amounts at least equal to the insurance premiums to be paid. If
      fifteen (15) days before payment is due, the reserve funds are
      insufficient, Grantor shall upon demand pay any deficiency to Lender. The
      reserve funds shall be held by Lender as a general deposit and shall
      constitute a non-interest-bearing account which Lender may satisfy by
      payment of the insurance premiums required to be paid by Grantor as they
      become due. Lender does not hold the reserve funds in trust for Grantor,
      and Lender is not the agent of Grantor for payment of the insurance
      premiums required to be paid by Grantor. The responsibility for the
      payment of premiums shall remain Grantor's sole responsibility.

      INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
      Lender reports on each existing policy of insurance showing such
      information as Lender may reasonably request including the following; (1)
      the name of the insurer; (2) the risks insured; (3) the amount of the
      policy; (4) the property insured; (5) the then current value on the basis
      of which insurance has been obtained and the manner of determining that
      value; and (6) the expiration date of the policy. In addition, Grantor
      shall upon request by Lender (however not more often than annually) have
      an independent appraiser satisfactory to Lender determine, as applicable,
      the cash value or replacement cost of the Collateral.

      FINANCING STATEMENTS. Grantor authorizes Lender to file a UCC-1 financing
      statement, or alternatively, a copy of this Agreement to perfect Lender's
      security interest. At Lender's request, Grantor additionally agrees to
      sign all other documents that are necessary to perfect, protect, and
      continue Lender's security interest in the Property. Grantor will pay all
      filing fees, title transfer fees, and other fees and costs involved unless
      prohibited by law or unless Lender is required by law to pay such fees and
      costs. Grantor irrevocably appoints Lender to execute financing statements
      and documents of title in Grantor's name and to execute all documents
      necessary to transfer title if there is a default. Lender may file a copy
      of this Agreement as a financing statement. If Grantor changes Grantor's
      name or address, or the name or address of any person granting a security
      interest under this Agreement changes, Grantor will promptly notify the
      Lender of such change.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
In Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures paid by Lender for such purposes will then bear interest at the
Note rate from the date paid by Lender to the date of repayment by Grantor. All
such expenses will become a part of the Indebtedness and, at Lender's option,
will (A) be payable on demand; (B) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C) be treated as a balloon payment which will be
due and payable at the Note's maturity. The Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon Default.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

      PAYMENT DEFAULT. Grantor fails to make any payment when due under the
      Indebtedness.

      OTHER DEFAULTS. Grantor fails to comply with or to perform any other term,
      obligation, covenant or condition contained in this Agreement or in any of
      the Related Documents or to comply with or to perform any term,
      obligation, covenant or condition contained in any other agreement between
      Lender and Grantor.

      DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
      under any loan, extension of credit, security agreement, purchase or sales
      agreement, or any other agreement, in favor of any other creditor or
      person that may materially affect any of Grantor's property or Grantor's
      or any Grantor's ability to repay the Indebtedness or perform their
      respective obligations under this Agreement or any of the Related
      Documents.

      FALSE STATEMENTS. Any warranty, representation or statement made or
      furnished to Lender by Grantor or on Grantor's behalf under this Agreement
      or the Related Documents is false or misleading in any material respect,
      either now or at the time made or furnished or becomes false or misleading
      at any time thereafter.

      DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
      Documents ceases to be in full force and effect (including failure of any

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                          COMMERCIAL SECURITY AGREEMENT
                                  (CONTINUED)                             PAGE 4

      collateral document to create a valid and perfected security interest or
      lien) at any time and for any reason.

      INSOLVENCY. The dissolution of Grantor (regardless of whether election to
      continue is made), any member withdraws from the limited liability
      company, or any other termination of Grantor's existence as a going
      business or the death of any member, the insolvency of Grantor, the
      appointment of a receiver for any part of Grantor's property, any
      assignment for the benefit of creditors, any type of creditor workout, or
      the commencement of any proceeding under any bankruptcy or insolvency laws
      by or against Grantor.

      CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
      forfeiture proceedings, whether by judicial proceeding, self-help,
      repossession or any other method, by any creditor of Grantor or by any
      governmental agency against any collateral securing the Indebtedness. This
      includes a garnishment of any of Grantor's accounts, including deposit
      accounts, with Lender. However, this Event of Default shall not apply if
      there is a good faith dispute by Grantor as to the validity or
      reasonableness of the claim which is the basis of the creditor or
      forfeiture proceeding and if Grantor gives Lender written notice of the
      creditor or forfeiture proceeding and deposits with Lender monies or a
      surety bond for the creditor or forfeiture proceeding, in an amount
      determined by Lender, in its sole discretion, as being an adequate reserve
      or bond for the dispute.

      EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
      respect to Guarantor of any of the Indebtedness or Guarantor dies or
      becomes incompetent or revokes or disputes the validity of, or liability
      under, any Guaranty of the Indebtedness.

      ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
      condition, or Lender believes the prospect of payment or performance of
      the Indebtedness is impaired.

      INSECURITY. Lender in good faith believes itself insecure.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Delaware Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

      ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
      including any prepayment penalty which Grantor would be required to pay,
      immediately due and payable, without notice of any kind to Grantor.

      ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
      or any portion of the Collateral and any and all certificates of title and
      other documents relating to the Collateral. Lender may require Grantor to
      assemble the Collateral and make it available to Lender at a place to be
      designated by Lender. Lender also shall have full power to enter upon the
      property of Grantor to take possession of and remove the Collateral. If
      the Collateral contains other goods not covered by this Agreement at the
      time of repossession, Grantor agrees Lender may take such other goods,
      provided that Lender makes reasonable efforts to return them to Grantor
      after repossession.

      SELL THE COLLATERAL. Lender shall have full power to sell, lease,
      transfer, or otherwise deal with the Collateral or proceeds thereof in
      Lender's own name or that of Grantor. Lender may sell the Collateral at
      public auction or private sale. Unless the Collateral threatens to decline
      speedily in value or is of a type customarily sold on a recognized market,
      Lender will give Grantor, and other persons as required by law, reasonable
      notice of the time and place of any public sale, or the time after which
      any private sale or any other disposition of the Collateral is to be made.
      However, no notice need be provided to any person who, after Event of
      Default occurs, enters into and authenticates an agreement waiving that
      person's right to notification of sale. The requirements of reasonable
      notice shall be met if such notice is given at least ten (10) days before
      the time of the sale or disposition. All expenses relating to the
      disposition of the Collateral, including without limitation the expenses
      of retaking, holding, insuring, preparing for sale and selling the
      Collateral, shall become a part of the Indebtedness secured by this
      Agreement and shall be payable on demand, with interest at the Note rate
      from date of expenditure until repaid.

      APPOINT RECEIVER. Lender shall have the right to have a receiver appointed
      to take possession of all or any part of the Collateral, with the power to
      protect and preserve the Collateral, to operate the Collateral preceding
      foreclosure or sale, and to collect the Rents from the Collateral and
      apply the proceeds, over and above the cost of the receivership, against
      the Indebtedness. The receiver may serve without bond if permitted by law.
      Lender's right to the appointment of a receiver shall exist whether or not
      the apparent value of the Collateral exceeds the Indebtedness by a
      substantial amount. Employment by Lender shall not disqualify a person
      from serving as a receiver.

      COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
      receiver, may collect the payments, rents, income, and revenues from the
      Collateral. Lender may at any time in Lender's discretion transfer any
      Collateral into Lender's own name or that of Lender's nominee and receive
      the payments, rents, income, and revenues therefrom and hold the same as
      security for the Indebtedness or apply it to payment of the Indebtedness
      in such order of preference as Lender may determine. Insofar as the
      Collateral consists of accounts, general intangibles, insurance policies,
      instruments, chattel paper, choses in action, or similar property, Lender
      may demand, collect, receipt for, settle, compromise, adjust, sue for,
      foreclose, or realize on the Collateral as Lender may determine, whether
      or not Indebtedness or Collateral is then due. For these purposes, Lender
      may, on behalf of and in the name of Grantor, receive, open and dispose of
      mail addressed to Grantor; change any address to which mail and payments
      are to be sent; and endorse notes, checks, drafts, money orders, documents
      of title, instruments and items pertaining to payment, shipment, or
      storage of any Collateral. To facilitate collection, Lender may notify
      account debtors and obligors on any Collateral to make payments directly
      to Lender.

      OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
      Lender may obtain a judgment against Grantor for any deficiency remaining
      on the Indebtedness due to Lender after application of all amounts
      received from the exercise of the rights provided in this Agreement.
      Grantor shall be liable for a deficiency even if the transaction described
      in this subsection is a sale of accounts or chattel paper.

      OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
      of a secured creditor under the provisions of the Uniform Commercial Code,
      as may be amended from time to time. In addition, Lender shall have and
      may exercise any or all other rights and remedies it may have available at
      law, in equity, or otherwise.

      ELECTION OF REMEDIES. Except as may be prohibited by applicable law, all
      of Lender's rights and remedies, whether evidenced by this Agreement, the
      Related Documents, or by any other writing, shall be cumulative and may be
      exercised singularly or concurrently. Election by Lender to pursue any
      remedy shall not exclude pursuit of any other remedy, and an election to
      make expenditures or to take action to perform an obligation of Grantor
      under this Agreement, after Grantor's failure to perform, shall not affect
      Lender's right to declare a default and exercise its remedies.

WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.

FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document is transmitted by

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                          COMMERCIAL SECURITY AGREEMENT
                                  (CONTINUED)                             PAGE 5

facsimile machine ("fax"), it shall be treated for all purposes as an original
document. Additionally, the signature of any party on this document transmitted
by way of a fax machine shall be considered for all purposes as an original
signature. Any such faxed document shall be considered to have the same binding
legal effect as an original document. At the request of any party, any faxed
document shall be re-executed by each signatory party in an original form.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

      AMENDMENTS. This Agreement, together with any Related Documents,
      constitutes the entire understanding and agreement of the parties as to
      the matters set forth in this Agreement. No alteration of or amendment to
      this Agreement shall be effective unless given in writing and signed by
      the party or parties sought to be charged or bound by the alteration or
      amendment.

      ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
      Lender's costs and expenses, including Lender's Lender's reasonable
      attorneys' fees and Lender's legal expenses, incurred in connection with
      the enforcement of this Agreement. Lender may hire or pay someone else to
      help enforce this Agreement, and Grantor shall pay the costs and expenses
      of such enforcement. Costs and expenses include Lender's Lender's
      reasonable attorneys' fees and legal expenses whether or not there is a
      lawsuit, including Lender's reasonable attorneys' fees and legal expenses
      for bankruptcy proceedings (including efforts to modify or vacate any
      automatic stay or injunction), appeals, and any anticipated post-judgment
      collection services. Grantor also shall pay all court costs and such
      additional fees as may be directed by the court.

      CAPTION HEADINGS. Caption headings in this Agreement are for convenience
      purposes only and are not to be used to interpret or define the provisions
      of this Agreement.

      GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED
      IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF TEXAS, EXCEPT
      AND ONLY TO THE EXTENT OF PROCEDURAL MATTERS RELATED TO THE PERFECTION AND
      ENFORCEMENT OF LENDER'S RIGHTS AND REMEDIES AGAINST THE COLLATERAL WHICH
      MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. HOWEVER,
      IN THE EVENT THAT THE ENFORCEABILITY OR VALIDITY OF ANY PROVISION OF THIS
      AGREEMENT IS CHALLENGED OR QUESTIONED, SUCH PROVISION SHALL BE GOVERNED BY
      WHICHEVER APPLICABLE STATE OR FEDERAL LAW WOULD UPHOLD OR WOULD ENFORCE
      SUCH CHALLENGED OR QUESTIONED PROVISION. THE LOAN TRANSACTION WHICH IS
      EVIDENCED BY THE NOTE AND THIS AGREEMENT HAS BEEN APPLIED FOR, CONSIDERED,
      APPROVED AND MADE, AND ALL NECESSARY LOAN DOCUMENTS HAVE BEEN ACCEPTED BY
      LENDER IN THE STATE OF TEXAS.

      CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
      by this Agreement occurred in BEXAR County, Grantor agrees upon Lender's
      request to submit to the jurisdiction of the courts of BEXAR County, State
      of Texas.

      NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
      under this Agreement unless such waiver is given in writing and signed by
      Lender. No delay or omission on the part of Lender in exercising any right
      shall operate as a waiver of such right or any other right. A waiver by
      Lender of a provision of this Agreement shall not prejudice or constitute
      a waiver of Lender's right otherwise to demand strict compliance with that
      provision or any other provision of this Agreement. No prior waiver by
      Lender, nor any course of dealing between Lender and Grantor, shall
      constitute a waiver of any of Lender's rights or of any of Grantor's
      obligations as to any future transactions. Whenever the consent of Lender
      is required under this Agreement, the granting of such consent by Lender
      in any instance shall not constitute continuing consent to subsequent
      instances where such consent is required and in all cases such consent may
      be granted or withheld in the sole discretion of Lender.

      NOTICES. Any notice required to be given under this Agreement shall be
      given in writing, and shall be effective when actually delivered, when
      actually received by telefacsimile (unless otherwise required by law),
      when deposited with a nationally recognized overnight courier, or, if
      mailed, when deposited in the United States mail, as first class,
      certified or registered mail postage prepaid, directed to the addresses
      shown near the beginning of this Agreement. Any party may change its
      address for notices under this Agreement by giving formal written notice
      to the other parties, specifying that the purpose of the notice is to
      change the party's address. For notice purposes, Grantor agrees to keep
      Lender informed at all times of Grantor's current address. Unless
      otherwise provided or required by law, if there is more than one Grantor,
      any notice given by Lender to any Grantor is deemed to be notice given to
      all Grantors.

      POWER OF ATTORNEY. Grantor hereby appoints Lender as Grantor's irrevocable
      attorney-in-fact for the purpose of executing any documents necessary to
      perfect, amend, or to continue the security interest granted in this
      Agreement or to demand termination of filings of other secured parties.
      Lender may at any time, and without further authorization from Grantor,
      file a carbon, photographic or other reproduction of any financing
      statement or of this Agreement for use as a financing statement. Grantor
      will reimburse Lender for all expenses for the perfection and the
      continuation of the perfection of Lender's security interest in the
      Collateral.

      SEVERABILITY. If a court of competent jurisdiction finds any provision of
      this Agreement to be illegal, invalid, or unenforceable as to any
      circumstance, that finding shall not make the offending provision illegal,
      invalid, or unenforceable as to any other circumstance. If feasible, the
      offending provision shall be considered modified so that it becomes legal,
      valid and enforceable. If the offending provision cannot be so modified,
      it shall be considered deleted from this Agreement. Unless otherwise
      required by law, the illegality, invalidity, or unenforceability of any
      provision of this Agreement shall not affect the legality, validity or
      enforceability of any other provision of this Agreement.

      SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this
      Agreement on transfer of Grantor's interest, this Agreement shall be
      binding upon and inure to the benefit of the parties, their successors and
      assigns. If ownership of the Collateral becomes vested in a person other
      than Grantor, Lender, without notice to Grantor, may deal with Grantor's
      successors with reference to this Agreement and the Indebtedness by way of
      forbearance or extension without releasing Grantor from the obligations of
      this Agreement or liability under the Indebtedness.

      SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
      warranties, and agreements made by Grantor in this Agreement shall survive
      the execution and delivery of this Agreement, shall be continuing in
      nature, and shall remain in full force and effect until such time as
      Grantor's Indebtedness shall be paid in full.

      TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
      Agreement.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:

      ACCOUNT. The word "Account" means a trade account, account receivable,
      other receivable, or other right to payment for goods sold or services
      rendered owing to Grantor (or to a third party grantor acceptable to
      Lender).

      AGREEMENT. The word "Agreement" means this Commercial Security
      Agreement, as this Commercial Security Agreement may be amended or
      modified from time to time, together with all exhibits and schedules
      attached to this Commercial Security Agreement from time to time.

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                  (CONTINUED)                             PAGE 6

      BORROWER. The word "Borrower" means Design Trends, LLC and includes all
      co-signers and co-makers signing the Note.

      COLLATERAL. The word "Collateral" means all of Grantor's right, title and
      interest in and to all the Collateral as described in the Collateral
      Description section of this Agreement.

      DEFAULT. The word "Default" means the Default set forth in this Agreement
      in the section titled "Default".

      ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
      federal and local statutes, regulations and ordinances relating to the
      protection of human health or the environment, including without
      limitation the Comprehensive Environmental Response, Compensation, and
      Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
      ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub.
      L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49
      U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
      42 U.S.C. Section 6901, et seq., or other applicable state or federal
      laws, rules, or regulations adopted pursuant thereto.

      EVENT OF DEFAULT. The words "Event of Default" mean any of the events of
      default set forth in this Agreement in the default section of this
      Agreement.

      GRANTOR. The word "Grantor" means Design Trends, LLC.

      GUARANTOR. The word "Guarantor" means any guarantor, surety, or
      accommodation party of any or all of the indebtedness.

      GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
      including without limitation a guaranty of all or part of the Note.

      HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials
      that, because of their quantity, concentration or physical, chemical or
      infectious characteristics, may cause or pose a present or potential
      hazard to human health or the environment when improperly used, treated,
      stored, disposed of, generated, manufactured, transported or otherwise
      handled. The words "Hazardous Substances" are used in their very broadest
      sense and include without limitation any and all hazardous or toxic
      substances, materials or waste as defined by or listed under the
      Environmental Laws. The term "Hazardous Substances" also includes, without
      limitation, petroleum and petroleum by-products or any fraction thereof
      and asbestos.

      INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
      the Note or Related Documents, including all principal and interest
      together with all other indebtedness and costs and expenses for which
      Grantor is responsible under this Agreement or under any of the Related
      Documents. Specifically, without limitation, Indebtedness includes all
      amounts that may be indirectly secured by the Cross-Collateralization
      provision of this Agreement.

      LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors
      and assigns.

      NOTE. The word "Note" means the Note executed by Design Trends, LLC in the
      principal amount of $2,000,000.00 dated June 14, 2004. together with all
      renewals of, extensions of, modifications of, refinancings of,
      consolidations of, and substitutions for the note or credit agreement.

      PROPERTY. The word "Property" means all of Grantor's right, title and
      interest in and to all the Property as described in the "Collateral
      Description" section of this Agreement.

      RELATED DOCUMENTS. The words "Related Documents" mean all promissory
      notes, credit agreements, loan agreements, environmental agreements,
      guaranties, security agreements, mortgages, deeds of trust, security
      deeds, collateral mortgages, and all other instruments, agreements and
      documents, whether now or hereafter existing, executed in connection with
      the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 14, 2004.

THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

GRANTOR:

DESIGN TRENDS, LLC

CRAFTMADE INTERNATIONAL, INC., MANAGER OF DESIGN TRENDS, LLC

By: /s/ James R. Ridings                          (SEAL)
    ----------------------------------------
    JAMES R. RIDINGS, PRESIDENT OF CRAFTMADE
    INTERNATIONAL, INC.

<PAGE>

[LOGO]

                               COMMERCIAL GUARANTY

<TABLE>
<CAPTION>
  PRINCIPAL    LOAN DATE  MATURITY  LOAN NO CALL/COLL ACCOUNT OFFICER  INITIALS
<S>            <C>        <C>       <C>     <C>       <C>     <C>      <C>
                                                               146
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or Item.
Any item above containing "***" has been omitted due to text length limitations.

BORROWER: DESIGN TRENDS, LLC (TIN: 75-2841381)   LENDER: THE FROST NATIONAL BANK
          P.O. BOX 1037                                  HULEN FINANCIAL CENTER
          COPPELL, TX 75019                              P.O. BOX 1600
                                                         SAN ANTONIO, TX 78296
GUARANTOR: DOLAN NORTHWEST, LLC (TIN: 93-1210304)
           1919 NW 19TH AVE
           PORTLAND, OR 97209

AMOUNT OF GUARANTY. THE PRINCIPAL AMOUNT OF THIS GUARANTY IS 50.000% OF ALL
AMOUNTS DUE FROM BORROWER TO LENDER AS PROVIDED BELOW, HOWEVER IN NO EVENT TO
EXCEED ONE MILLION & 00/100 DOLLARS ($1,000,000.00).

GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, DOLAN NORTHWEST, LLC
("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO
THE FROST NATIONAL BANK ("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED
STATES OF AMERICA, 50.000% OF THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW)
OF DESIGN TRENDS, LLC ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET
FORTH IN THIS GUARANTY. GUARANTOR AGREES THAT LENDER, IN ITS SOLE DISCRETION,
MAY DETERMINE WHICH PORTION OF BORROWER'S INDEBTEDNESS TO LENDER IS COVERED BY
GUARANTOR'S PERCENTAGE GUARANTY.

MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $1,000,000.00,
plus all interest thereon, plus all of Lender's costs, expenses, and Lender's
reasonable attorneys' fees incurred in connection with or relating to (A) the
collection of the Indebtedness, (B) the collection and sale of any collateral
for the Indebtedness or this Guaranty, or (C) the enforcement of this Guaranty.
Attorneys' fees include, without limitation, Lender's reasonable attorneys' fees
whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs
for trial and appeals.

The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, Lender's rights under all guaranties shall
be cumulative. This Guaranty shall not (unless specifically provided below to
the contrary) affect or invalidate any such other guaranties. Guarantor's
liability will be Guarantor's aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.

INDEBTEDNESS GUARANTEED. The Indebtedness guaranteed by this Guaranty includes
the Note, including (a) all principal, (b) all interest, (c) all late charges,
(d) all loan fees and loan charges, and (e) all collection costs and expenses
relating to the Note or to any collateral for the Note. Collection costs and
expenses include without limitation all of Lender's Lender's reasonable
attorneys' fees.

DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all of Guarantor's other
obligations under this Guaranty shall have been performed in full. Release of
any other guarantor or termination of any other guaranty of the Indebtedness
shall not affect the liability of Guarantor under this Guaranty. A revocation
Lender receives from any one or more Guarantors shall not affect the liability
of any remaining Guarantors under this Guaranty. THIS GUARANTY COVERS A
REVOLVING LINE OF CREDIT AND IT IS SPECIFICALLY ANTICIPATED THAT FLUCTUATIONS
WILL OCCUR IN THE AGGREGATE AMOUNT OF INDEBTEDNESS OWING FROM BORROWER TO
LENDER. GUARANTOR SPECIFICALLY ACKNOWLEDGES AND AGREES THAT FLUCTUATIONS IN THE
AMOUNT OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($ 0.00), SHALL NOT CONSTITUTE A
TERMINATION OF THIS GUARANTY. GUARANTOR'S LIABILITY UNDER THIS GUARANTY SHALL
TERMINATE ONLY UPON (A) TERMINATION IN WRITING BY BORROWER AND LENDER OF THE
LINE OF CREDIT, (B) PAYMENT OF THE INDEBTEDNESS IN FULL IN LEGAL TENDER, AND (C)
PAYMENT IN FULL IN LEGAL TENDER OF ALL OF GUARANTOR'S OTHER OBLIGATIONS UNDER
THIS GUARANTY.

GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, WITHOUT NOTICE
OR DEMAND AND WITHOUT LESSENING OR OTHERWISE AFFECTING GUARANTOR'S LIABILITY
UNDER THIS GUARANTY, FROM TIME TO TIME: (A) to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments and credits shall be made on the Indebtedness (F) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(B) this Guaranty is executed at Borrower's request and not at the request of
Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (E) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor's financial condition, as of
the dates the financial

<PAGE>


                               COMMERCIAL GUARANTY
                                  (CONTINUED)                             PAGE 2

information is provided; (G) no material adverse change has occurred in
Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (H) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (J)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.

GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (A) to continue lending money or to extend other
credit to Borrower; (B) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (C) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor, (D) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (F) to pursue any other
remedy within Lender's power; or (G) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.

In addition to the waivers set forth herein, if now or hereafter Borrower is or
shall become insolvent and the Indebtedness shall not at all times until paid be
fully secured by collateral pledged by Borrower, Guarantor hereby forever waives
and gives up in favor of Lender and Borrower, and Lender's and Borrower's
respective successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall Guarantor be or become a "creditor" of Borrower within the
meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal
bankruptcy laws.

Guarantor waives all rights of Guarantor under Chapter 34 of the Texas Business
and Commerce Code. Guarantor also waives any and all rights or defenses arising
by reason of (A) any "one action" or "anti-deficiency" law or any other law
which may prevent Lender from bringing any action, including a claim for
deficiency, against Guarantor, before or after Lender's commencement or
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (B) any election of remedies by Lender which destroys or
otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights
to proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (C) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by reason of the
cessation of Borrower's liability from any cause whatsoever, other than payment
in full in legal tender, of the Indebtedness; (D) any right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral for
the Indebtedness; (E) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced, there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable statute
of limitations; or (F) any defenses given to guarantors at law or in equity
other than actual payment and performance of the Indebtedness. If payment is
made by Borrower, whether voluntarily or otherwise, or by any third party, on
the Indebtedness and thereafter Lender is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of the enforcement of
this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.

SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be superior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:

      AMENDMENTS. This Guaranty, together with any Related Documents,
      constitutes the entire understanding and agreement of the parties as to
      the matters set forth in this Guaranty. No alteration of or amendment to
      this Guaranty shall be effective unless given in writing and signed by the
      party or parties sought to be charged or bound by the alteration or
      amendment.

      ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
      Lender's costs and expenses, including Lender's reasonable attorneys' fees
      and Lender's legal expenses, incurred in connection with the enforcement
      of this Guaranty. Lender may hire or pay someone else to help enforce this
      Guaranty, and Guarantor shall pay the costs and expenses of such
      enforcement. Costs and expenses include Lender's reasonable attorneys'
      fees and legal expenses whether or not there is a lawsuit, including
      Lender's reasonable attorneys' fees and legal expenses for bankruptcy
      proceedings (including efforts to modify or vacate any automatic stay or
      injunction), appeals, and any anticipated post-judgment collection
      services. Guarantor also shall pay all court costs and such additional
      fees as may be directed by the court.

      CAPTION HEADINGS. Caption headings in this Guaranty are for convenience
      purposes only and are not to be used to interpret or define the provisions
      of this Guaranty.

      GOVERNING LAW. This Guaranty will be governed by, construed and enforced
      in accordance with federal law and the laws of the State of Texas. This
      Guaranty has been accepted by Lender in the State of Texas.

<PAGE>

                               COMMERCIAL GUARANTY
                                  (CONTINUED)                             PAGE 3

      CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
      by this Guaranty occurred in BEXAR County, Guarantor agrees upon Lender's
      request to submit to the jurisdiction of the courts of BEXAR County, State
      of Texas.

      INTEGRATION. Guarantor further agrees that Guarantor has read and fully
      understands the terms of this Guaranty; Guarantor has had the opportunity
      to be advised by Guarantor's attorney with respect to this Guaranty; the
      Guaranty fully reflects Guarantor's intentions and parol evidence is not
      required to interpret the terms of this Guaranty. Guarantor hereby
      indemnifies and holds Lender harmless from all losses, claims, damages,
      and costs (including Lender's attorneys' fees) suffered or incurred by
      Lender as a result of any breach by Guarantor of the warranties,
      representations and agreements of this paragraph.

      INTERPRETATION. In all cases where there is more than one Borrower or
      Guarantor, then all words used in this Guaranty in the singular shall be
      deemed to have been used in the plural where the context and construction
      so require; and where there is more than one Borrower named in this
      Guaranty or when this Guaranty is executed by more than one Guarantor, the
      words "Borrower" and "Guarantor" respectively shall mean all and any one
      or more of them. The words "Guarantor," "Borrower," and "Lender" include
      the heirs, successors, assigns, and transferees of each of them. If a
      court finds that any provision of this Guaranty is not valid or should not
      be enforced, that fact by itself will not mean that the rest of this
      Guaranty will not be valid or enforced. Therefore, a court will enforce
      the rest of the provisions of this Guaranty even if a provision of this
      Guaranty may be found to be invalid or unenforceable. If any one or more
      of Borrower or Guarantor are corporations, partnerships, limited liability
      companies, or similar entitles, it is not necessary for Lender to inquire
      into the powers of Borrower or Guarantor or of the officers, directors,
      partners, managers, or other agents acting or purporting to act on their
      behalf, and any Loan indebtedness made or created in reliance upon the
      professed exercise of such powers shall be guaranteed under this Guaranty.

      NOTICES. Any notice required to be given under this Guaranty shall be
      given in writing, and shall be effective when actually delivered, when
      actually received by telefacsimile (unless otherwise required by law),
      when deposited with a nationally recognized overnight courier, or, if
      mailed, when deposited in the United States mail, as first class,
      certified or registered mail postage prepaid, directed to the addresses
      shown near the beginning of this Guaranty. Any party may change its
      address for notices under this Guaranty by giving formal written notice to
      the other parties, specifying that the purpose of the notice is to change
      the party's address. For notice purposes, Guarantor agrees to keep Lender
      informed at all times of Guarantor's current address. Unless otherwise
      provided or required by law, if there is more than one Guarantor, any
      notice given by Lender to any Guarantor is deemed to be notice given to
      all Guarantors.

      NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
      under this Guaranty unless such waiver is given in writing and signed by
      Lender. No delay or omission on the part of Lender in exercising any right
      shall operate as a waiver of such right or any other right. A waiver by
      Lender of a provision of this Guaranty shall not prejudice or constitute a
      waiver of Lender's right otherwise to demand strict compliance with that
      provision or any other provision of this Guaranty. No prior waiver by
      Lender, nor any course of dealing between Lender and Guarantor, shall
      constitute a waiver of any of Lender's rights or of any of Guarantor's
      obligations as to any future transactions. Whenever the consent of Lender
      is required under this Guaranty, the granting of such consent by Lender in
      any instance shall not constitute continuing consent to subsequent
      instances where such consent is required and in all cases such consent may
      be granted or withheld in the sole discretion of Lender.

      SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty
      on transfer of Guarantor's interest, this Guaranty shall be binding upon
      and inure to the benefit of the parties, their successors and assigns.

WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.

FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document is transmitted by facsimile machine ("fax"), it
shall be treated for all purposes as an original document. Additionally, the
signature of any party on this document transmitted by way of a fax machine
shall be considered for all purposes as an original signature. Any such faxed
document shall be considered to have the same binding legal effect as an
original document. At the request of any party, any faxed document shall be
re-executed by each signatory party in an original form.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Guaranty. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Guaranty shall have the meanings
attributed to such terms in the Uniform Commercial Code:

      BORROWER. The word "Borrower" means Design Trends, LLC and includes all
      co-signers and co-makers signing the Note.

      GUARANTOR. The word "Guarantor" means each and every person or entity
      signing this Guaranty, including without limitation Craftmade
      International, LLC.

      GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
      including without limitation a guaranty of all or part of the Note.

      INDEBTEDNESS. The word "Indebtedness" means Borrower's indebtedness to
      Lender as more particularly described in this Guaranty.

      LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors
      and assigns.

      NOTE. The word "Note" means the promissory note dated June 14, 2004, in
      the original principal amount of $2,000,000.00 from Borrower to Lender,
      together with all renewals of, extensions of, modifications of,
      refinancings of, consolidations of, and substitutions for the promissory
      note or agreement.

      RELATED DOCUMENTS. The words "Related Documents" mean all promissory
      notes, credit agreements, loan agreements, environmental agreements,
      guaranties, security agreements, mortgages, deeds of trust, security
      deeds, collateral mortgages, and all other instruments, agreements and
      documents, whether now or hereafter existing, executed in connection with
      the Indebtedness.

<PAGE>

                               COMMERCIAL GUARANTY
                                  (CONTINUED)                             PAGE 4

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 14, 2004.

GUARANTOR;

DOLAN NORTHWEST, LLC

By: /s/ Patrick S.Dolan                         /s/ Dan Dolan
    -----------------------------------         --------------------------------
    PATRICK S. DOLAN, MEMBER OF DOLAN           DAN DOLAN Managing Member of
    NORTHWEST, LLC                              DOLAN NORTHWEST LLC
<PAGE>

[LOGO]

                               COMMERCIAL GUARANTY

PRINCIPAL  LOAN DATE  MATURITY  LOAN NO  CALL/COLL  ACCOUNT  OFFICER  INITIALS
                                                      146

   References in the shaded area are for Lender's use only and do not limit
   the applicability of this document to any particular loan or item. Any item
   above containing " * * * " has been omitted due to text length limitations.

BORROWER:  DESIGN TRENDS, LLC (TIN: 75-2841381)  LENDER: THE FROST NATIONAL BANK
           P.O. BOX 1037                                 HULEN FINANCIAL CENTER
           COPPELL, TX 75019                             P.O. BOX 1600
                                                         SAN ANTONIO, TX 78296

GUARANTOR: CRAFTMADE INTERNATIONAL, INC. (TIN: 75-2057054)
           P.O. BOX 1037
           COPPELL, TX 75019

AMOUNT OF GUARANTY. THE PRINCIPAL AMOUNT OF THIS GUARANTY IS 50,000% OF ALL
AMOUNTS DUE FROM BORROWER TO LENDER AS PROVIDED BELOW, HOWEVER IN NO EVENT TO
EXCEED ONE MILLION & 00/100 DOLLARS ($1,000,000.00).

GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, CRAFTMADE INTERNATIONAL,INC.
("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO
THE FROST NATIONAL BANK ("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED
STATES OF AMERICA, 50,000% OF THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW)
OF DESIGN TRENDS, LLC ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET
FORTH IN THIS GUARANTY. GUARANTOR AGREES THAT LENDER, IN ITS SOLE DISCRETION,
MAY DETERMINE WHICH PORTION OF BORROWER'S INDEBTEDNESS TO LENDER IS COVERED BY
GUARANTOR'S PERCENTAGE GUARANTY.

MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $1,000,000.00,
plus all interest thereon, plus all of Lender's costs, expenses, and Lender's
reasonable attorneys' fees incurred in connection with or relating to (A) the
collection of the Indebtedness, (B) the collection and sale of any collateral
for the Indebtedness or this Guaranty, or (C) the enforcement of this Guaranty.
Attorneys' fees include, without limitation, Lender's reasonable attorneys' fees
whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs
for trial and appeals.

The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, Lender's rights under all guaranties shall
be cumulative. This Guaranty shall not (unless specifically provided below to
the contrary) affect or invalidate any such other guaranties. Guarantor's
liability will be Guarantor's aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.

INDEBTEDNESS GUARANTEED. The Indebtedness guaranteed by this Guaranty includes
the Note, including (a) all principal, (b) all interest, (c) all late charges.
(d) all loan fees and loan charges, and (e) all collection costs and expenses
relating to the Note or to any collateral for the Note. Collection costs and
expenses include without limitation all of Lender's Lender's reasonable
attorneys' fees.

DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all of Guarantor's other
obligations under this Guaranty shall have been performed in full. Release of
any other guarantor or termination of any other guaranty of the Indebtedness
shall not affect the liability of Guarantor under this Guaranty. A revocation
Lender receives from any one or more Guarantors shall not affect the liability
of any remaining Guarantors under this Guaranty. THIS GUARANTY COVERS A
REVOLVING LINE OF CREDIT AND IT IS SPECIFICALLY ANTICIPATED THAT FLUCTUATIONS
WILL OCCUR IN THE AGGREGATE AMOUNT OF INDEBTEDNESS OWING FROM BORROWER TO
LENDER. GUARANTOR SPECIFICALLY ACKNOWLEDGES AND AGREES THAT FLUCTUATIONS IN THE
AMOUNT OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($ 0.00), SHALL NOT CONSTITUTE A
TERMINATION OF THIS GUARANTY. GUARANTOR'S LIABILITY UNDER THIS GUARANTY SHALL
TERMINATE ONLY UPON (A) TERMINATION IN WRITING BY BORROWER AND LENDER OF THE
LINE OF CREDIT, (B) PAYMENT OF THE INDEBTEDNESS IN FULL IN LEGAL TENDER, AND (C)
PAYMENT IN FULL IN LEGAL TENDER OF ALL OF GUARANTOR'S OTHER OBLIGATIONS UNDER
THIS GUARANTY.

GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice
or demand and without lessening or otherwise affecting Guarantor's liability
under this Guaranty, from time to time: (A) to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to altar,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments and credits shall be made on the Indebtedness (F) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(B) this Guaranty is executed at Borrower's request and not at the request of
Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (E) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (F) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor's financial
condition, as of the dates the financial

<PAGE>

                              COMMERCIAL GUARANTY
                                  (CONTINUED)                             PAGE 2

information is provided; (G) no material adverse change has occurred in
Guarantor's financial condition since the date of the most recent financial
statements provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (H) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (J)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.

GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (A) to continue lending money or to extend other
credit to Borrower; (B) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (C) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (D) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (F) to pursue any other
remedy within Lender's power; or (G) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.

In addition to the waivers set forth herein, if now or hereafter Borrower is or
shall become insolvent and the Indebtedness shell not at all times until paid be
fully secured by collateral pledged by Borrower, Guarantor hereby forever waives
and gives up in favor of Lender and Borrower, and Lender's and Borrower's
respective successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall Guarantor be or become a "creditor" of Borrower within the
meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal
bankruptcy laws.

Guarantor waives all rights of Guarantor under Chapter 34 of the Texas Business
and Commerce Code. Guarantor also waives any and all rights or defenses arising
by reason of (A) any "one action" or "anti-deficiency" law or any other law
which may prevent Lender from bringing any action, including a claim for
deficiency, against Guarantor, before or after Lender's commencement or
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (B) any election of remedies by Lender which destroys or
otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights
to proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (C) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by reason of the
cessation of Borrower's liability from any cause whatsoever, other than payment
in full in legal tender, of the Indebtedness; (D) any right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral for
the Indebtedness; (E) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced, there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable statute
of limitations; or (F) any defenses given to guarantors at law or in equity
other than actual payment and performance of the Indebtedness. If payment is
made by Borrower, whether voluntarily or otherwise, or by any third party, on
the Indebtedness and thereafter Lender is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of the enforcement of
this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.

SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be superior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:

      AMENDMENTS. This Guaranty, together with any Related Documents,
      constitutes the entire understanding and agreement of the parties as to
      the matters set forth in this Guaranty. No alteration of or amendment to
      this Guaranty shall be effective unless given in writing and signed by the
      party or parties sought to be charged or bound by the alteration or
      amendment.

      ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of
      Lender's costs and expenses, including Lender's reasonable attorneys' fees
      and Lender's legal expenses, incurred in connection with the enforcement
      of this Guaranty. Lender may hire or pay someone else to help enforce this
      Guaranty, and Guarantor shall pay the costs and expenses of such
      enforcement. Costs and expenses include Lender's reasonable attorneys'
      fees and legal expenses whether or not there is a lawsuit, including
      Lender's reasonable attorneys' fees and legal expenses for bankruptcy
      proceedings (including efforts to modify or vacate any automatic stay or
      injunction), appeals, and any anticipated post-judgment collection
      services. Guarantor also shall pay all court costs and such additional
      fees as may be directed by the court.

      CAPTION HEADINGS. Caption headings in this Guaranty are for convenience
      purposes only and are not to be used to interpret or define the provisions
      of this Guaranty.

      GOVERNING LAW. This Guaranty will be governed by, construed and enforced
      in accordance with federal law and the laws of the State of Texas. This
      Guaranty has been accepted by Lender in the State of Texas.

<PAGE>

                              COMMERCIAL GUARANTY
                                   (CONTINUED)                            PAGE 3

      CHOICE OF VENUE. If there is a lawsuit, and if the transaction evidenced
      by this Guaranty occurred in BEXAR County, Guarantor agrees upon Lender's
      request to submit to the jurisdiction of the courts of BEXAR County, State
      of Texas.

      INTEGRATION. Guarantor further agrees that Guarantor has read and fully
      understands the terms of this Guaranty; Guarantor has had the opportunity
      to be advised by Guarantor's attorney with respect to this Guaranty; the
      Guaranty fully reflects Guarantor's intentions and parol evidence is not
      required to interpret the terms of this Guaranty. Guarantor hereby
      indemnifies and holds Lender harmless from all losses, claims, damages,
      and costs (including Lender's attorneys' fees) suffered or incurred by
      Lender as a result of any breach by Guarantor of the warranties,
      representations and agreements of this paragraph.

      INTERPRETATION. In all cases where there is more than one Borrower or
      Guarantor, then all words used in this Guaranty in the singular shall be
      deemed to have been used in the plural where the context and construction
      so require; and where there is more than one Borrower named in this
      Guaranty or when this Guaranty is executed by more than one Guarantor, the
      words "Borrower" and "Guarantor" respectively shall mean all and any one
      or more of them. The words "Guarantor," "Borrower," and "Lender" include
      the heirs, successors, assigns, and transferees of each of them. If a
      court finds that any provision of this Guaranty is not valid or should not
      be enforced, that fact by itself will not mean that the rest of this
      Guaranty will not be valid or enforced. Therefore, a court will enforce
      the rest of the provisions of this Guaranty even if a provision of this
      Guaranty may be found to be invalid or unenforceable. If any one or more
      of Borrower or Guarantor are corporations, partnerships, limited liability
      companies, or similar entitles, it is not necessary for Lender to inquire
      into the powers of Borrower or Guarantor or of the officers, directors,
      partners, managers, or other agents acting or purporting to act on their
      behalf, and any Loan indebtedness made or created in reliance upon the
      professed exercise of such powers shall be guaranteed under this Guaranty.

      NOTICES. Any notice required to be given under this Guaranty shall be
      given in writing, and shall be effective when actually delivered, when
      actually received by telefacsimile (unless otherwise required by law),
      when deposited with a nationally recognized overnight courier, or, if
      mailed, when deposited in the United States mail, as first class,
      certified or registered mail postage prepaid, directed to the addresses
      shown near the beginning of this Guaranty. Any party may change its
      address for notices under this Guaranty by giving formal written notice to
      the other parties, specifying that the purpose of the notice is to change
      the party's address. For notice purposes, Guarantor agrees to keep Lender
      informed at all times of Guarantor's current address. Unless otherwise
      provided or required by law, if there is more than one Guarantor, any
      notice given by Lender to any Guarantor is deemed to be notice given to
      all Guarantors.

      NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
      under this Guaranty unless such waiver is given in writing and signed by
      Lender. No delay or omission on the part of Lender in exercising any right
      shall operate as a waiver of such right or any other right. A waiver by
      Lender of a provision of this Guaranty shall not prejudice or constitute a
      waiver of Lender's right otherwise to demand strict compliance with that
      provision or any other provision of this Guaranty. No prior waiver by
      Lender, nor any course of dealing between Lender and Guarantor, shall
      constitute a waiver of any of Lender's rights or of any of Guarantor's
      obligations as to any future transactions. Whenever the consent of Lender
      is required under this Guaranty, the granting of such consent by Lender in
      any instance shall not constitute continuing consent to subsequent
      instances where such consent is required and in all cases such consent may
      be granted or withheld in the sole discretion of Lender.

      SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty
      on transfer of Guarantor's interest, this Guaranty shall be binding upon
      and inure to the benefit of the parties, their successors and assigns.

WAIVER OF RIGHT TO TRIAL BY JURY. THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT TO ENFORCE THIS AGREEMENT, TO
COLLECT DAMAGES FOR THE BREACH OF THIS AGREEMENT, OR WHICH IN ANY OTHER WAY
ARISE OUT OF, ARE CONNECTED TO OR ARE RELATED TO THIS AGREEMENT OR THE SUBJECT
MATTER OF THIS AGREEMENT. ANY SUCH ACTION SHALL BE TRIED BY THE JUDGE WITHOUT A
JURY.

FACSIMILE DOCUMENTS AND SIGNATURES. For purposes of negotiating and finalizing
this document, if this document is transmitted by facsimile machine ("fax"), it
shall be treated for all purposes as an original document. Additionally, the
signature of any party on this document transmitted by way of a fax machine
shall be considered for all purposes as an original signature. Any such taxed
document shall be considered to have the same binding legal effect as an
original document. At the request of any party, any faxed document shall be
re-executed by each signatory party in an original form.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Guaranty. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America. Words and terms used in the singular shall include the
plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Guaranty shall have the meanings
attributed to such terms in the Uniform Commercial Code:

      BORROWER. The word "Borrower" means Design Trends, LLC and includes all
      co-signers and co-makers signing the Note.

      GUARANTOR. The word "Guarantor" means each and every person or entity
      signing this Guaranty, including without limitation Craftmade
      International, Inc..

      GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
      including without limitation a guaranty of all or part of the Note.

      INDEBTEDNESS. The word "Indebtedness" means Borrower's indebtedness to
      Lender as more particularly described in this Guaranty.

      LENDER. The word "Lender" means THE FROST NATIONAL BANK, its successors
      and assigns.

      NOTE. The word "Note" means the promissory note dated June 14, 2004, in
      the original principal amount of $2,000,000.00 from Borrower to Lender,
      together with all renewals of, extensions of, modifications of,
      refinancings of, consolidations of, and substitutions for the promissory
      note or agreement.

      RELATED DOCUMENTS. The words "Related Documents" mean all promissory
      notes, credit agreements, loan agreements, environmental agreements,
      guaranties, security agreements, mortgages, deeds of trust, security
      deeds, collateral mortgages, and all other instruments, agreements and
      documents, whether now or hereafter existing, executed in connection with
      the Indebtedness.

<PAGE>

                               COMMERCIAL GUARANTY
                                   (CONTINUED)                            PAGE 4

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 14, 2004.

GUARANTOR:

CRAFTMADE INTERNATIONAL, INC.

By:/s/ James R. Ridings
       ----------------------------------------
       JAMES R. RIDINGS, PRESIDENT OF CRAFTMADE
       INTERNATIONAL, INC.
<PAGE>

[LOGO]

                            NOTICE OF FINAL AGREEMENT

<TABLE>
<CAPTION>
  PRINCIPAL    LOAN DATE  MATURITY  LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
<C>           <C>        <C>        <C>     <C>       <C>     <C>     <C>
$2,000,000.00 06-14-2004 10-31-2005  9001             3560802  146
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.

BORROWER: DESIGN TRENDS, LLC (TIN: 75-2841381)   LENDER: THE FROST NATIONAL BANK
          P.O. BOX 1037                                  HULEN FINANCIAL CENTER
          COPPELL, TX 75019                              P.O. BOX 1600
                                                         SAN ANTONIO, TX 78296

      THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
      PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
      OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
      AGREEMENTS BETWEEN THE PARTIES.

      AS USED IN THIS NOTICE, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:

            LOAN. The term "Loan" means the following described loan: a
            non-precomputed Variable Rate Nondisclosable Revolving Line of
            Credit Loan to a Limited Liability Company for $2,000,000.00 due on
            October 31, 2005. The reference rate (Lender's prime rate as
            established from time to time, currently 4.000%), resulting in an
            initial rate of 4.000.

            LOAN AGREEMENT. The term "Loan Agreement" means one or more
            promises, promissory notes, agreements, undertakings, security
            agreements, deeds of trust or other documents, or commitments, or
            any combination of those actions or documents, relating to the Loan,
            including without limitation the following:

                                 LOAN DOCUMENTS

<TABLE>
<S>                                                         <C>
Corporate Resolution: Craftmade International, Inc.         LLC Resolution: DOLAN NORTHWEST, LLC
LLC Resolution: Design Trends, LLC                          Resolution of Corporate LLC Member: Craftmade International,
Resolution of Limited Liability Company LLC Member: DOLAN   Inc.
NORTHWEST, LLC                                              Business Loan Agreement (Asset Based)
Promissory Note                                             TX Commercial Guaranty: DOLAN NORTHWEST, LLC
TX Commercial Guaranty: Craftmade International, Inc.       DE Commercial Security Agreement: All Inventory and Accounts;
DE Revised National UCC FS: All Inventory and Accounts;     owned by Design Trends, LLC
owned by Design Trends, LLC                                 Arbitration Agreement - ARBITRATION AGREEMENT
Disbursement Request and Authorization                      Notice of Final Agreement
</TABLE>

PARTIES. The term "Parties" means THE FROST NATIONAL BANK and any and all
entities or individuals who are obligated to repay the loan or have pledged
property as security for the Loan, including without limitation the following:

       BORROWER:    DESIGN TRENDS, LLC

       GRANTOR(s):  DESIGN TRENDS, LLC

       GUARANTOR 1: CRAFTMADE INTERNATIONAL, INC.

       GUARANTOR 2: DOLAN NORTHWEST, LLC

<PAGE>

                            NOTICE OF FINAL AGREEMENT
                                  (CONTINUED)                             PAGE 2

This Notice of Final Agreement is given by THE FROST NATIONAL BANK pursuant to
Section 26.02 of the Texas Business and Commerce Code. Each Party who signs
below, other than THE FROST NATIONAL BANK, acknowledges, represents, and
warrants to THE FROST NATIONAL BANK that it has received, read and understood
this Notice of Final Agreement. This Notice is dated June 14, 2004.

BORROWER:

DESIGN TRENDS, LLC

CRAFTMADE INTERNATIONAL, INC., MANAGER OF DESIGN TRENDS, LLC

BY: /s/ JAMES R. RIDINGS
    ------------------------------------
   JAMES R. RIDINGS, PRESIDENT OF CRAFTMADE
   INTERNATIONAL, INC.

GUARANTOR:

CRAFTMADE INTERNATIONAL, INC.

By: /s/ JAMES R. RIDINGS
    ------------------------------------
    JAMES R. RIDINGS, PRESIDENT OF CRAFTMADE
    INTERNATIONAL. INC.

GUARANTOR:

DOLAN NORTHWEST, LLC

By:/s/ DAN DOLAN
   ----------------------------------------
   DAN DOLAN, MANAGER OF DOLAN
   NORTHWEST, LLC

LENDER:

THE FROST NATIONAL BANK

   /s/ D. MICHAEL RANDALL
   -----------------------------------
   AUTHORIZED SIGNER


<PAGE>
                              ARBITRATION AGREEMENT

<TABLE>
<CAPTION>
  PRINCIPAL    LOAN DATE  MATURITY  LOAN NO CALL/COLL ACCOUNT OFFICER INITIALS
<C>           <C>        <C>        <C>     <C>       <C>     <C>     <C>
$2,000,000.00 06-14-2004 10-31-2005  9001             3560802  146
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.

BORROWER: DESIGN TRENDS, LLC (TIN: 75-2841381)   LENDER: THE FROST NATIONAL BANK
          P.O. BOX 1037                                  HULEN FINANCIAL CENTER
          COPPELL, TX 75019                              P.O. BOX 1600
                                                         SAN ANTONIO, TX 78296

LOAN AMOUNT: $2,000,000.00
LOAN DATE:   JUNE 14, 2004

The undersigned agree that all disputes, claims and controversies between them,
whether individual, joint, or class in nature, arising from the Promissory Note,
Guaranty, or any agreements executed in connection with this loan (including any
renewals, extensions or modifications thereof) from Lender to Borrower or
otherwise, including without limitation contract and tort disputes, shall be
arbitrated pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, upon written request of a party. The party that
requests arbitration has the burden to initiate the arbitration proceedings
pursuant to and by complying with the Commercial Arbitration Rules of the
American Arbitration Association and shall pay all associated administrative and
filing fees. The arbitration shall be conducted in the City of San Antonio,
Bexar County, Texas, and administered by the American Arbitration Association.
All arbitration hearings will be commenced within sixty (60) days of the written
request for arbitration, and if the arbitration hearing is not commenced within
the sixty (60) days, the party that requested arbitration shall have waived its
election to arbitrate. No act to take or dispose of any collateral securing the
loan shall constitute a waiver of this arbitration agreement or be prohibited by
this arbitration agreement. This includes, without limitation, obtaining
injunctive relief or a temporary restraining order; invoking a power of sale
under any deed of trust or mortgage; obtaining a writ of attachment or
imposition of a receiver; or exercising any rights relating to personal
property, including taking or disposing of such property with or without
judicial process pursuant to Chapter or Article 9 of the Uniform Commercial
Code. Any disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any collateral
securing the loan, including any claim to rescind, reform, or otherwise modify
any agreement relating to the collateral securing the loan, shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this agreement shall preclude any party from seeking equitable relief
from a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration proceeding, and
the commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation, and enforcement of this arbitration agreement

This Agreement may be executed in multiple counterparts, each of which shall
constitute an original instrument, but all of which shall constitute one and the
same agreement.

BORROWER:

DESIGN TRENDS, LLC,

CRAFTMADE INTERNATIONAL, INC., MANAGER

BY: /s/JAMES R. RIDINGS
    --------------------------------------------
    JAMES R. RIDINGS, PRESIDENT

GUARANTOR:

CRAFTMADE INTERNATIONAL, INC.

BY: /s/JAMES R. RIDINGS
    --------------------------------------------
    JAMES R. RIDINGS, PRESIDENT

GUARANTOR:

DOLAN NORTHWEST, LLC

BY: /s/ DAN DOLAN
    ---------------------------------------------
    DAN DOLAN, MANAGER

LENDER:

BY: /s/ D. MICHAEL RANDALL
    -----------------------------------
    Authorized Officer.
<PAGE>

                       ACTION BY UNANIMOUS WRITTEN CONSENT

                                OF THE MEMBERS OF

                               DESIGN TRENDS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

      The undersigned, constituting all of the members of Design Trends, LLC, a
Delaware limited liability company (the "Company"), do hereby waive notice of
the meeting of the members of the Company and do hereby consent and agree,
pursuant to the provisions of Section 3.14 of the Limited Liability Company
Agreement of the Company, to the adoption of the following resolutions:

                        APPROVAL OF BORROWING RESOLUTIONS

      WHEREAS, the Company proposes to enter into that certain Business Loan
Agreement (the "Loan Agreement"), by and among the Company and The Frost
National Bank, a national banking association (the "Bank") to borrow an original
principal amount of $2 million from Bank, a copy of which is attached hereto as
Exhibit A; now therefore be it

            RESOLVED, that the executive officers of the Company (the
      "Authorized Persons") are hereby authorized for and on behalf of and as
      the act and deed of this Company to borrow money or obtain credit from the
      Bank in such amounts, for such times, in such forms (including, but not
      limited to, notes, facilities, acceptances, letters of credit and
      overdrafts) and upon such terms as may be deemed by such Authorized
      Persons to be advisable; to renew and extend from time to time any such
      loan or credit arrangement; to execute and deliver to Bank, in such form
      as may be required by Bank, notes, loan agreements, drafts, letters of
      credit applications and other instruments and documents relating to any
      indebtedness owing by this Company to Bank or relating to any other
      arrangement whereby Bank extends credit to this Company, whether fixed or
      contingent; to mortgage, hypothecate, encumber, pledge, assign or transfer
      to Bank, or otherwise subject to any lien or security interest in favor of
      Bank, as security for any such indebtedness, any property of this Company,
      real or personal, tangible or intangible; to sell to Bank with or without
      recourse, any of this Company's notes, bills receivable, acceptances or
      other paper, whether or not negotiable; and to take all such other actions
      as such Authorized Persons may deem to be necessary or desirable, or as
      Bank may require, to consummate any transaction contemplated in these
      resolutions; and be it

            FURTHER RESOLVED, that Bank be and it hereby is authorized to credit
      this Company on Bank's books with the proceeds as directed by such
      Authorized Persons, whether to the order of any said persons in his
      individual capacity or not, and whether such proceeds are deposited to the
      individual credit of any such person or not; and be it

<PAGE>

            FURTHER RESOLVED, that the foregoing authority shall be and continue
      in full force and effect until revoked or modified by written notice
      actually delivered to the President or a Vice President of Bank; provided
      that such revocation shall not be effective with respect to any exercise
      of any said authority prior to the receipt by Bank of such notice; and be
      it

            FURTHER RESOLVED, that any and all lawful actions heretofore taken
      by an officer of the Company in his or her capacity as such and in
      connection with the matters contemplated in the foregoing resolutions be,
      and they hereby are, in all respects approved, adopted, ratified and
      confirmed as the act and deed of the Company; and be it

            FURTHER RESOLVED, that the Authorized Persons be, and each hereby
      is, authorized, for and in the name and on behalf of the Company, to
      execute the Loan Agreement in substantially the form submitted to,
      reviewed and approved by Craftmade International, Inc., a Delaware
      corporation ("Craftmade"), the manager of the Company, with such changes
      therein as he, in his sole discretion approves, such approval to be
      conclusively evidenced by his execution thereof, and to deliver the Loan
      Agreement as so executed to the Bank; and be it

            FURTHER RESOLVED, that the Authorized Persons be, and each hereby
      is, authorized, for and in the name and on behalf of the Company, to
      execute the Promissory Note referenced in the Loan Agreement in
      substantially the form submitted to, reviewed and approved by Craftmade,
      with such changes therein as he, in his sole discretion approves, such
      approval to be conclusively evidenced by his execution thereof, and to
      deliver the Promissory Note as so executed to the Bank; and be it

            FURTHER RESOLVED, that each Authorized Person be, and hereby is,
      authorized, empowered and directed, for and in the name and on behalf of
      the Company, to do all such things and acts and to execute and deliver all
      such agreements, papers, instruments and documents as may be, in his sole
      discretion, deemed necessary or advisable in order to carry out and comply
      with all of the terms, covenants, conditions and provisions of the Loan
      Agreement as actually executed and delivered and the transactions
      contemplated by the Loan Agreement; and be it

            FURTHER RESOLVED, that each Authorized Person be, and he hereby is,
      authorized, empowered and directed, for and in the name and on behalf of
      the Company, to amend the Loan Agreement after its execution as may be, in
      his sole discretion, deemed necessary or advisable, such necessity or
      advisability to be conclusively evidenced by his execution thereof.

<PAGE>

                                 FURTHER ACTIONS

            RESOLVED, that the appropriate officers and manager of the Company
      be, and they hereby are, authorized and directed to do all other acts,
      take all actions and prepare all papers, instruments and documents in
      connection therewith which they, in their sole discretion, deem proper in
      order to accomplish and carry out the intents and purposes of the
      foregoing resolution, and any and all actions previously carried out in
      accordance herewith be, and they hereby are, ratified, confirmed, approved
      and adopted as the official acts and deeds of the Company.

<PAGE>

      IN WITNESS WHEREOF, the undersigned members have hereunto set their hand,
in one or more counterparts, as of the 14th day of June 2004.

                                         CRAFTMADE INTERNATIONAL, INC.

                                         By: /s/ James R. Ridings
                                             ----------------------------------
                                         Name: James R. Ridings
                                         Title: President

                                         DOLAN NORTHWEST, LLC

                                         By: /s/ Dan Dolan
                                             ----------------------------------
                                         Name: Dan Dolan
                                         Title: Manager

<PAGE>

                                    EXHIBIT A

                             BUSINESS LOAN AGREEMENT
<PAGE>

                       ACTION BY UNANIMOUS WRITTEN CONSENT

                                OF THE MEMBERS OF

                              DOLAN NORTHWEST, LLC
                      (AN OREGON LIMITED LIABILITY COMPANY)

      The undersigned, constituting all of the members of Dolan Northwest, LLC,
a Oregon limited liability company (the "Company"), do hereby waive notice of
the meeting of the members of the Company and do hereby consent and agree,
pursuant to the provisions of Section of the Limited Liability Company Agreement
of the Company, to the adoption of the following resolutions:

                           APPROVAL OF GUARANTY RESOLUTIONS

      WHEREAS, the Company owns 50% of the issued, and outstanding membership
interests of Design Trends, LLC, a Delaware limited liability company ("Design
Trends"); and

      WHEREAS, the Company proposes to enter into a guaranty of 50% of all
indebtedness of Design Trends to The Frost National Bank, a national banking
association (the "Lender") or $1 million, whichever is less, pursuant to that
certain Business Loan Agreement by and between Design Trends and Lender (the
"Design Trends Loan"), a copy of which is attached hereto as Exhibit A; now
therefore be it

            RESOLVED, that pursuant to the Design Trends Loan, this Company
      execute and deliver to Lender a guaranty whereby this Company guarantees
      payment of 50% of all indebtedness of Design Trends to Lender or $1
      million, whichever is less, and any and all renewals, extensions,
      rearrangements and substitutions therefor, and be it

            FURTHER RESOLVED, that the form and content of the guaranty is
      substantially the same as the form attached hereto as Exhibit A, and that
      said form was submitted at this meeting and the same is hereby approved;
      and be it

            FURTHER RESOLVED, that the execution and delivery of said guaranty
      to Lender, will benefit, directly or indirectly, this Company; and be it

            FURTHER RESOLVED, that the executive officers of the Company (the
      "Authorized Persons") be and each of them hereby severally is authorized
      and directed for and on behalf of and as the act and deed of this Company
      to execute and deliver unto Lender, the guaranty authorized and referred
      to in these resolutions, and to take such other action in the consummation
      of the transaction herein contemplated as he or she shall deem necessary
      or desirable, and any and all actions heretofore or hereafter taken by
      such officer(s) of this Company to
<PAGE>

      such end are hereby expressly ratified and confirmed as the act and deeds
      of this Company; and be it

            FURTHER RESOLVED, that the foregoing authority shall be and continue
      in full force and effect until revoked or modified by written notice
      actually delivered to the President or a Vice President of Lender;
      provided that such revocation shall not be effective with respect to any
      exercise of any said authority prior to the receipt by Lender of such
      notice; and be it

            FURTHER RESOLVED, that any and all lawful actions heretofore taken
      by an officer of the Company in his or her capacity as such and in
      connection with the matters contemplated in the foregoing resolutions be,
      and they hereby are, in all respects approved, adopted, ratified and
      confirmed as the act and deed of the Company.

                                 FURTHER ACTIONS

            RESOLVED, that the appropriate officers of the Company be, and they
      hereby are, authorized and directed to do all other acts, take all actions
      and prepare all papers, instruments and documents in connection therewith
      which they, in their sole discretion, deem proper in order to accomplish
      and carry out the intents and purposes of the foregoing resolution, and
      any and all actions previously carried out in accordance herewith be, and
      they hereby are, ratified, confirmed, approved and adopted as the official
      acts and deeds of the Company.

                                    * * * * *

<PAGE>

      IN WITNESS WHEREOF, the undersigned members have hereunto set their hand,
in one or more counterparts, as of the 14th day of June 2004.

                                        /s/ Patrick S. Dolan
                                        ------------------------------------
                                        Patrick S. Dolan

                                        /s/ Daniel J. Dolan
                                        ------------------------------------
                                        Daniel J. Dolan

                                        /s/ Jean R. Dolan
                                        ------------------------------------
                                        Jean R. Dolan

                                        /s/ Mark K. Gedeon
                                        ------------------------------------
                                        Mark K. Gedeon

<PAGE>

                                   EXHIBIT A

                                    GUARANTY