8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):

October 31, 2005

CRAFTMADE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-26667	75-2057054
(State of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

650 South Royal Lane, Suite 100
Coppell, Texas 75019

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (972) 393-3800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01 Entry into a Material Definitive Agreement.
	Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
Amended and Restated Loan Agreement
Modification, Renewal and Extension Agreement

Section 1 — Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement.

     On October 31, 2005, Craftmade International Inc. (“Craftmade”) executed an Amended and Restated Loan Agreement (the “Loan Agreement”) of the existing revolving promissory note and a Modification, Renewal and Extension Agreement (the “Extension Agreement”) with The Frost National Bank, San Antonio, Texas, in the amount of $20,000,000 at an interest rate equal to the London Interbank Offered Rate (“LIBOR”) plus the following amounts based on the Craftmade’s “Debt to Net Worth” ratio:

Percentage	Debt to Net Worth Ratio
2.75%	>3.00 to 1.00
2.25%	>=2.50 to 1.00 or <=3.00 to 1.00
1.75%	>2.00 to 1.00 or <2.50 to 1.00
1.50%	<=2.00 to 1.00

     The Loan Agreement will mature on October 31, 2007.

     Pursuant to the Loan Agreement, the financial covenants have been amended to remove the “Interest Coverage Ratio” and reduce the “Fixed Charge Coverage Ratio” from 1.5:1 to 1.25:1. Additionally, the Loan Agreement removes the negative covenant that limited dividends to 33% of the prior year’s net income. All wholly owned subsidiaries of Craftmade and Design Trends LLC, a 50% owned subsidiary of Craftmade, have agreed to be guarantors of the Agreement.

     The Loan Agreement also provides the customary acceleration and default provisions. The foregoing description is qualified in its entirety by reference to the Loan Agreement and the Extension Agreement, a copy of each is filed herewith as Exhibit 10.1 and Exhibit 10.2, respectively.

Section 2 — Financial Information

Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

     See Item 1.01 “Entry into a Material Definitive Agreement.”

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits.
		10.1	Amended and Restated Loan Agreement by and among Craftmade International, Inc. and The Frost National Bank, dated October 31, 2005.
		10.2	Modification, Renewal and Extension Agreement by and among Craftmade International, Inc. and The Frost National Bank, dated October 31, 2005.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CRAFTMADE INTERNATIONAL, INC.
Date: November 3, 2005	By:	/s/ J. Marcus Scrudder
		J. Marcus Scrudder
		Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Amended and Restated Loan Agreement by and among Craftmade International, Inc. and The Frost National Bank, dated October 31, 2005.
10.2	Modification, Renewal and Extension Agreement by and among Craftmade International, Inc. and The Frost National Bank, dated October 31, 2005.

EX-10.1

Exhibit 10.1

AMENDED AND RESTATED LOAN AGREEMENT

Between

CRAFTMADE INTERNATIONAL, INC.		THE FROST NATIONAL BANK
650 South Royal Lane	and	P.O. Box 1600
Coppell, Texas 75019		San Antonio, Texas 78205

October 31, 2005

     THIS AMENDED AND RESTATED LOAN AGREEMENT (the “Loan Agreement”) will serve to set forth the terms of the financing transactions by and between CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (“Borrower”), and THE FROST NATIONAL BANK, a national banking association (“Lender”). Borrower and Lender entered into a Loan Agreement, dated November 6, 2001, as amended by a First Amendment to Loan Agreement, dated effective as of August 13, 2003, as modified by a Modification, Renewal and Extension Agreement, entered into October 27, 2003, as further amended by a Second Amendment to Loan Agreement, dated June 14, 2004, as further amended by a Third Amendment to Loan Agreement, dated February 25, 2005, and as further amended by a Modification, Renewal and Extension Agreement, dated effective as of May 31, 2005. Lender has agreed to modify, renew and extend the Borrowing Base Line of Credit (hereinafter defined), the terms and conditions which are set forth in this Loan Agreement.

          1.      Credit Facilities;Interest Rate Options. Subject to the terms and conditions set forth in this Loan Agreement and the agreements, instruments and documents evidencing, securing, governing, guaranteeing and/or pertaining to the Loans, as hereinafter defined (collectively, together with the Loan Agreement, referred to hereinafter as the “Loan Documents”), Lender hereby agrees to provide to Borrower the credit facility or facilities hereinbelow (whether one or more, the “Credit Facilities”):

     (a)     (I)     Borrowing Base Line of Credit. Subject to the terms and conditions set forth herein, Lender agrees to lend to Borrower, on a revolving basis from time to time during the period commencing on the date hereof and continuing through the maturity date of the promissory note evidencing this Credit Facility from time to time, such amounts as Borrower may request hereunder; provided, however, the total principal amount outstanding at any time shall not exceed the lesser of (i) an amount equal to the Revolving Borrowing Base (as such term is defined hereinbelow), or (ii) $20,000,000.00 (the “Borrowing Base Line of Credit”). If at any time the aggregate principal amount outstanding under the Borrowing Base Line of Credit shall exceed an amount equal to the Revolving Borrowing Base (as such term is defined hereinbelow), Borrower agrees to immediately repay to Lender such excess amount, plus all accrued but unpaid interest thereon. Subject to the terms and conditions hereof, Borrower may borrow, repay and reborrow hereunder. The sums advanced under the Borrowing Base Line of Credit shall be used for working capital

The term “Revolving Borrowing Base” shall have the meaning set forth hereinbelow:

An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s Eligible Inventory minus the outstanding principal balance of the Borrowing Base Advance Facility (hereinafter defined); provided, however, the outstanding amount Advanced against Eligible Inventory at any time shall not exceed 50% of total outstanding Advances (herein so called) under the Borrowing Base Line of Credit.

          (II)      Borrowing Base Advance Facility. Subject to the terms and conditions set forth herein, Lender agrees to lend to Borrower, on a revolving basis from time to time during the period commencing on the date hereof and continuing through the maturity date of the promissory note evidencing this Credit Facility from time to time, an aggregate amount not to exceed $3,000,000.00 in a single advance or in multiple advances, as may be requested by Borrower from time to time; provided, however, the total principal amount outstanding at any time shall not exceed the lesser of (i) an amount equal to the Advancing Borrowing Base (as such term is defined hereinbelow), or (ii) $3,000,000.00 (the “Borrowing Base Advance Facility”). All sums advanced under the Borrowing Base Advance Facility shall be used for inventory purposes.

The term “Advancing Borrowing Base” shall have the meaning set forth hereinbelow:

An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s Eligible Inventory minus the outstanding principal balance of the Borrowing Base Line of Credit; provided, however, the outstanding amount Advanced against Eligible Inventory at any time shall not exceed 50% of total outstanding Advances (herein so called) under the Borrowing Base Advance Facility.

As used in this Loan Agreement, the term “Borrowing Base” shall have the meaning set forth hereinbelow:

An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s Eligible Inventory; provided, however, the outstanding amount Advanced against Eligible Inventory at any time shall not exceed 50% of total outstanding Advances (herein so called) under the Borrowing Base Line of Credit (as hereinafter defined).

As used herein, the term “Eligible Accounts” shall mean at anytime, an amount equal to the aggregate net invoice or ledger amount owing on all trade accounts receivable of Borrower and any Affiliates for goods sold or leased or services rendered in the ordinary course of business, in which the Lender has a perfected, first priority lien, after deducting (without duplication): (i) each such account that is unpaid 60 days or more after the original invoice date thereof, or, in the case of Lowe’s, 90 days or more after the original invoice date thereof, (ii) the amount of all discounts, allowances, rebates, credits and adjustments to such accounts (iii) the amount of all contra accounts, setoffs, defenses or counterclaims asserted by or available to the account debtors, (iv) all accounts with

2

respect to which goods are placed on consignment or subject to a guaranteed sale or other terms by reason of which payment by the account debtor may be conditional, (v) all accounts with respect to which a payment and/or performance bond has been furnished and that portion of any account for or representing retainage, if any, until all prerequisites to the immediate payment of retainage have been satisfied, (vi) all accounts owing by account debtors for which there has been instituted a proceeding in bankruptcy or reorganization under the United States Bankruptcy Code or other law, whether state or federal, now or hereafter existing for relief of debtors, (vii) all accounts owing by any Affiliates; (viii) all accounts in which the account debtor is the United States or any department, agency or instrumentality of the United States, except to the extent an acknowledgment of assignment to Lender of such account in compliance with the Federal Assignment of Claims Act and other applicable laws has been received by Lender, (ix) all accounts due by any account debtor whose principal place of business is located outside the United States of America and its territories, (x) all accounts subject to any provision prohibiting assignment or requiring notice of or consent to such assignment, (xi) that portion of all account balances owing by any single account debtor which exceeds 25% of the aggregate of all accounts otherwise deemed eligible hereunder which are owing by all account debtors, other than Lowe’s, and (xii) any other accounts deemed unacceptable by Lender in its sole and absolute discretion; provided, however, if more than 20% of the then balance owing by any single account debtor does not qualify as an Eligible Account under the foregoing provisions, then the aggregate amount of all accounts owing by such account debtor shall be excluded from Eligible Accounts.

As used herein, the term “Eligible Inventory” shall mean as of any date, the aggregate value of all inventory of raw materials and finished goods (excluding work in progress and packaging materials, supplies and any advertising costs capitalized into inventory) then owned by Borrower and any Affiliates and held for sale, lease or other disposition in the ordinary course of its business, in which Lender has a first priority lien, excluding (i) inventory which is damaged, defective, obsolete or otherwise unsaleable in the ordinary course of business, (ii) inventory which has been returned or rejected, and (iii) inventory subject to any consignment arrangement with any other person or entity. For purposes of this definition, Eligible Inventory shall be valued at the lower of cost (excluding the cost of labor) or market value.

All Advances under the Credit Facilities shall be collectively called the “Loans”. Lender reserves the right to require Borrower to give Lender not less than one (1) business day prior notice of each requested Advance under the Credit Facilities, specifying (i) the aggregate amount of such requested Advance, (ii) the requested date of such Advance, and (iii) the purpose of such Advance, with such Advances to be requested in a form satisfactory to Lender.

     (b)      Interest Rate. The interest to be paid by Borrower and collected by Lender on each Advance shall be at one of the following rates as requested by Borrower:

3

     The lesser of (x) a rate equal to the London Interbank Offered Rate (as defined below) plus the following percentage based on Borrower’s “Debt to Worth Ratio” set forth in Paragraph 9(a) below:

Percentage	Debt to Worth Ratio
2.75%	>3.00 to 1.00
2.25%	>=2.50 to 1.00 or <=3.00 to 1.00
1.75%	>2.00 to 1.00 or <2.50 to 1.00
1.50%	<=2.00 to 1.00

as adjusted provided below, or (y) the highest rate permitted by applicable law, but in no event shall interest exceed the maximum interest permitted by law (“Libor Rate”). Such rate will be adjusted based upon Lender’s receipt of Borrower’s Compliance Certificate as provided in Section 10(c) of the Loan Agreement, with the “Debt to Worth Ratio” calculation. If Borrower fails to provide the Compliance Certificate as provided in Section 10(c) then the percentage will be 2.75% until the delivery of the next quarter’s Compliance Certificate.

As used herein, the “London Interbank Offered Rate” shall mean with respect to any Interest Period (defined below), the rate of interest per annum (rounded to the nearest 1/16 of 1%—and if the rate is equidistant to the lower and higher nearest 1/16 of 1%, rounded upwards to the nearest 1/16 of 1%) quoted in U.S. Dollars by the British Bankers’ Association at approximately 11:00 a.m. London time on the first day of such Interest Period on which deposits in immediately available funds are offered to first class banks in the interbank eurodollar market (as determined by Lender in its sole discretion), such deposits being for a one (1) month period (“Interest Period”), and in amounts equal to or comparable to the amount of the Advance. In the event that the London Interbank Offered Rate is no longer published or reported as specified above, then the Lender shall use the rate of interest published in The Wall Street Journal (Central Edition) in the “Money Rates” section as the “London Interbank Offered Rates (LIBOR)” for a period of time equal or comparable to the applicable Interest Period, as of five (5) Business Days preceding the date of the Advance. Each determination by Lender of the London Interbank Offered Rate shall be conclusive and binding, absent manifest error, and may be computed using any reasonable averaging and attribution method.

     (c)      Increased Cost. If any governmental agency, court, central bank or comparable authority shall impose any taxation, required level of reserves (except reserve requirements for certificates of deposit), deposits, insurance or capital, or similar requirements against assets, deposits or credit extended by Lender or shall impose on Lender or the eurodollar market any other condition affecting Advances, and the result of the foregoing is to increase the cost of Lender making or maintaining Advances or reduce

4

any sums received or receivable by Lender under this Loan Agreement or the Notes by a material amount as determined by Lender in its sole discretion, then Borrower shall reimburse Lender for such increased costs or reduced sums upon demand. Nothing herein will be construed to require Borrower to pay any interest, fees, costs or charges greater than the highest rate permitted by law.

     2.      Promissory Notes. The Loans shall be evidenced by one or more promissory notes (whether one or more, together with any renewals, extensions and increases thereof, the “Notes”) duly executed by Borrower and payable to the order of Lender, in form and substance acceptable to Lender. Interest on the Notes shall accrue at the rate set forth herein. The principal of and interest on the Notes shall be due and payable in accordance with the terms and conditions set forth in the Notes and in this Loan Agreement.

     3.      Collateral. As collateral and security for the indebtedness evidenced by the Notes and any and all other indebtedness or obligations from time to time owing by Borrower to Lender, Borrower, Trade Source International, Inc., Durocraft International, Inc. and Design Trends, LLC (together hereinafter referred to as “Pledgors”) shall grant, and hereby grants, to Lender, its successors and assigns, a first and prior lien and security interest in and to the property described hereinbelow, together with any and all PRODUCTS AND PROCEEDS thereof (the “Collateral”):

     (a)      All present and future accounts, (including any right to payment for goods sold or services rendered arising out of the sale or delivery of personal property or work done or labor performed by Pledgors), now or hereafter owned, held, or acquired by Borrower and its Affiliates (as hereinafter defined), together with any and all books of account, customer lists and other records relating in any way to the foregoing.

     (b)      All present and hereafter acquired inventory (including without limitation, all raw materials, work in process and finished goods) held, possessed, owned, held on consignment, or held for sale, lease, return or to be furnished under contracts of service, in whole or in part, by Pledgors wherever located.

The term “Collateral” shall also include all records and data relating to any of the foregoing (including, without limitation, any computer software on which such records and data may be located). Pledgors shall execute such security agreements, assignments, deeds of trust and other agreements and documents as Lender shall deem appropriate and otherwise require from time to time to more fully create and perfect Lender’s lien and security interests in the Collateral.

     4.      Guarantors. Durocraft International, Inc., a Texas corporation; Trade Source International, Inc., a Delaware corporation; Design Trends, LLC, a Delaware limited liability company; and C/D/R Incorporated, a Delaware corporation, as guarantors of the indebtedness evidenced by the Notes, as set forth in Guaranty Agreements (collectively, the “Guarantys”) dated November 6, 2001, hereby expressly agree (a) to all of the terms and provisions of this Loan Agreement, (b) to the continuing validity of the Guarantys and all duties and obligations thereunder, (c) that their liability under the Guarantys shall not be reduced, altered, limited, lessened or in any

5

way affected by the execution and delivery of this Agreement by the parties hereto, and (d) that the Guarantys shall remain in full force and effect and enforceable in accordance with their terms.

     5.      Representations and Warranties. Borrower hereby represents and warrants, and upon each request for an Advance under the Credit Facilities further represents and warrants, to Lender as follows:

     (a)      Existence. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and all other states where it is doing business, and has all requisite power and authority to execute and deliver the Loan Documents.

     (b)      Binding Obligations. The execution, delivery, and performance of this Loan Agreement and all of the other Loan Documents by Borrower have been duly authorized by all necessary action by Borrower, and constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, except as limited by Bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights and except to the extent specific remedies may generally be limited by equitable principles.

     (c)      No Consent. The execution, delivery and performance of this Loan Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, do not (i) conflict with, result in a violation of, or constitute a default under (A) any provision of its articles or certificate of incorporation or bylaws, if Borrower is a corporation, or its partnership agreement, if Borrower is a partnership, or any agreement or other instrument binding upon Borrower, or (B) any law, governmental regulation, court decree or order applicable to Borrower, or (ii) require the consent, approval or authorization of any third party.

     (d)      Financial Condition. Each financial statement of Borrower supplied to the Lender truly discloses and fairly presents Borrower’s financial condition as of the date of each such statement. There has been no material adverse change in such financial condition or results of operations of Borrower subsequent to the date of the most recent financial statement supplied to Lender.

     (e)      Litigation. There are no actions, suits or proceedings, pending or, to the knowledge of Borrower, threatened against or affecting Borrower or the properties of Borrower, before any court or governmental department, commission or board, which, if determined adversely to Borrower, would have a material adverse effect on the financial condition, properties, or operations of Borrower.

     (f)      Taxes; Governmental Charges. Borrower has filed all federal, state and local tax reports and returns required by any law or regulation to be filed by it and has either duly paid all taxes, duties and charges indicated due on the basis of such returns

6

and reports, or made adequate provision for the payment thereof, and the assessment of any material amount of additional taxes in excess of those paid and reported is not reasonably expected.

     6.      Conditions Precedent to Advances. Lender’s obligation to make any Advance under this Loan Agreement and the other Loan Documents shall be subject to the conditions precedent that, as of the date of such Advance and after giving effect thereto (i) all representations and warranties made to Lender in this Loan Agreement and the other Loan Documents shall be true and correct, as of and as if made on such date, (ii) no material adverse change in the financial condition of Borrower since the effective date of the most recent financial statements furnished to Lender by Borrower shall have occurred and be continuing, (iii) no event has occurred and is continuing, or would result from the requested Advance, which with notice or lapse of time, or both, would constitute an Event of Default (as hereinafter defined), and (iv) Lender’s receipt of all Loan Documents appropriately executed by Borrower and all other proper parties.

     7.      Affirmative Covenants. Until (i) the Notes and all other obligations and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower agrees and covenants that it will, unless Lender shall otherwise consent in writing:

     (a)      Accounts and Records. Maintain its books and records in accordance with generally accepted accounting principles.

     (b)      Right of Inspection. Permit Lender to visit its properties and installations and to examine, audit and make and take away copies or reproductions of Borrower’s books and records, at all reasonable times.

     (c)      Right to Additional Information. Furnish Lender with such additional information and statements, lists of assets and liabilities, tax returns, and other reports with respect to Borrower’s financial condition and business operations as Lender may request from time to time.

     (d)      Compliance with Laws. Conduct its business in an orderly and efficient manner consistent with good business practices, and perform and comply with all statutes, rules, regulations and/or ordinances imposed by any governmental unit upon Borrower and its businesses, operations and properties (including without limitation, all applicable environmental statutes, rules, regulations and ordinances).

     (e)      Taxes. 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,

7

or profits; provided, however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (i) the legality of the same shall be contested in good faith by appropriate judicial, administrative or other legal proceedings, and (ii) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien or claim in accordance with generally accepted accounting principles, consistently applied.

     (f)      Insurance. Maintain insurance, including but not limited to, fire insurance, comprehensive property damage, public liability, worker’s compensation, business interruption and other insurance deemed necessary or otherwise required by Lender.

     (g)      Notice of Indebtedness. Promptly inform Lender of the creation, incurrence or assumption by Borrower of any actual or contingent liabilities not permitted under this Loan Agreement.

     (h)      Notice of Litigation. Promptly after the commencement thereof, notify Lender of all actions, suits and proceedings before any court or any governmental department, commission or board affecting Borrower or any of its properties.

     (i)      Notice of Material Adverse Change. Promptly inform Lender of (i) any and all material adverse changes in Borrower’s financial condition, and (ii) all claims made against Borrower which could materially affect the financial condition of Borrower.

     (j)      Additional Documentation. Execute and deliver, or cause to be executed and delivered, any and all other agreements, instruments or documents which Lender may reasonably request in order to give effect to the transactions contemplated under this Loan Agreement and the other Loan Documents.

     8.      Negative Covenants. Until (i) the Notes and all other obligations and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will not, without the prior written consent of Lender:

     (a)      Nature of Business. Make any material change in the nature of its business as carried on as of the date hereof.

     (b)      Liquidations, Mergers, Consolidations. Liquidate, merge or consolidate with or into any other entity.

     (c)      Sale of Assets. Sell, transfer or otherwise dispose of any of its assets or properties, other than in the ordinary course of business.

     (d)      Liens. Create or incur any lien or encumbrance on any of its assets, other than (i) liens and security interests securing indebtedness owing to Lender, (ii) liens for

8

taxes, assessments or similar charges that are (1) not yet due or (2) being contested in good faith by appropriate proceedings and for which Borrower has established adequate reserves, (iii) liens and security interests existing as of the date hereof which have been disclosed to and approved by Lender in writing, and (iv) purchase money security interests covering assets other than the Collateral incurred in the normal course of business.

     (e)      Indebtedness. Create, incur or assume any indebtedness for borrowed money or issue or assume any other note, debenture, bond or other evidences of indebtedness, or guarantee any such indebtedness or such evidences of indebtedness of others, other than (i) borrowings from Lender, (ii) borrowings outstanding on the date hereof and disclosed in writing to Lender, and (iii) borrowings representing trade debt incurred in the normal course of business.

     (f)      Change in Management. Permit a change in the senior management of Borrower.

     (g)      Loans. Make any loans to any person or entity except for (i) loans to Affiliates, and (ii) loans to officers and directors of Borrower not to exceed $100,000.00 in the aggregate at any one time.

     (h)      Transactions with Affiliates. Enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate (as hereinafter defined) of Borrower, except in the ordinary course of and pursuant to the reasonable requirements of Borrower’s business and upon fair and reasonable terms no less favorable to Borrower than would be obtained in a comparable arm’s-length transaction with a person or entity not an Affiliate of Borrower. As used in this Loan Agreement, the term “Affiliate” means (i) any individual or entity directly or indirectly controlling, controlled by, or under common control with, another individual or entity, and (ii) Design Trends, LLC.

     9.      Financial Covenants. Until (i) the Notes and all other obligations and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will maintain the following financial covenants on a consolidated basis:

     (a)      Debt to Worth Ratio. Borrower will maintain, at all times, a ratio of (a) total liabilities (excluding any Subordinated Debt), to (b) Tangible Net Worth of not greater than 3.5 to 1.0 beginning September 30, 2005; and 3.0 to 1.0 beginning December 31, 2005 and thereafter, tested quarterly. If Borrower’s Debt to Worth Ratio exceeds 3.0 to 1.0 then Borrower will not make any stock repurchases.

     (b)      Fixed Charge Coverage Ratio. Borrower will maintain, as of the end of each fiscal quarter, a ratio of (a) net income after taxes plus depreciation, amortization,

9

other non-cash expenses and interest expense for the 4 most recently completed quarters ending with such fiscal quarter to (b) interest expense, dividends and capital expenditures and current portion of long-term debt for such 4 quarter period, of not less than 1.25 to 1.0.

As used herein, the term “Tangible Net Worth” means, as of any date, Borrower’s total assets excluding all intangible assets, less total liabilities excluding any Subordinated Debt. As used herein, the term “Subordinated Debt” means any indebtedness owing by Borrower which has been subordinated by written agreement to all indebtedness now or hereafter owing by Borrower to Lender, such agreement to be in form and substance acceptable to Lender. Unless otherwise specified, all accounting and financial terms and covenants set forth above are to be determined according to generally accepted accounting principles, consistently applied.

     10.      Reporting Requirements. Until (i) the Notes and all other obligations and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will, unless Lender shall otherwise consent in writing, furnish to Lender on a consolidated basis:

     (a)      Interim Financial Statements. As soon as available, and in any event within forty five (45) days after the end of each quarter of each fiscal year of Borrower, a balance sheet and income statement of Borrower as of the end of such fiscal quarter, all in form and substance and in reasonable detail satisfactory to Lender and duly certified (subject to year-end review adjustments) by the President and/or Chief Financial Officer of Borrower (i) as being true and correct in all material aspects to the best of his or her knowledge and (ii) as having been prepared in accordance with generally accepted accounting principles, consistently applied.

     (b)      Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of Borrower, a balance sheet and income statement of Borrower as of the end of such fiscal year, in each case audited and unqualified by independent public accountants of recognized standing acceptable to Lender.

     (c)      Compliance Certificate. A certificate signed by the Chief Financial Officer of Borrower within forty five (45) days after the end of each quarter of each fiscal year of Borrower, stating that Borrower is in full compliance with all of its obligations under this Loan Agreement and all other Loan Documents and is not in default of any term or provisions hereof or thereof, and demonstrating compliance with all financial ratios and covenants set forth in the Loan Agreement.

     (d)      Borrowing Base Report. A borrowing base report for the Revolving Borrowing Base and the Advancing Borrowing Base signed by the Chief Financial Officer of Borrower within thirty (30) days after the end of each month of each fiscal year, in form and detail satisfactory to Lender.

10

     (e)      Accounts Aging. An account receivable aging report within thirty (30) days after the end of each month of each fiscal year, in form and detail satisfactory to Lender.

     (f)      10K Filings. Borrower’s annual 10K filing with the Securities and Exchange Commission within (30) days after such filing.

     (g)      10Q Filings. Borrower’s quarterly 10Q filing with the Securities and Exchange Commission within forty five (45) days after the end of each quarter of each fiscal year of Borrower.

     (h)      Additional Information. Such other additional financial information as Lender may request from time to time, including, without, limitation, operating statements on any assets listed on Borrower’s financial statement.

     11.      Events of Default. Each of the following shall constitute an “Event of Default” under this Loan Agreement:

     (a)      The failure, refusal or neglect of Borrower to pay when due any part of the principal of, or interest on, the Notes or any other indebtedness or obligations owing to Lender by Borrower from time to time.

     (b)      The failure of Borrower or any Obligated Party (as defined below) to timely and properly observe, keep or perform any covenant, agreement, warranty or condition required herein or in any of the other Loan Documents.

     (c)      The occurrence of an event of default under any of the other Loan Documents or under any other agreement now existing or hereafter arising between Lender and Borrower.

     (d)      Any representation contained herein or in any of the other Loan Documents made by Borrower or any Obligated Party is false or misleading in any material respect.

     (e)      The occurrence of any event which permits the acceleration of the maturity of any indebtedness owing by Borrower to any third party under any agreement or understanding.

     (f)      If Borrower or any Obligated Party: (i) becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due; (ii) generally is not paying its debts as such debts become due; (iii) has a receiver, trustee or custodian appointed for, or take possession of, all or substantially all of the assets of such party, either in a proceeding brought by such party or in a proceeding brought against such party

11

and such appointment is not discharged or such possession is not terminated within sixty (60) days after the effective date thereof or such party consents to or acquiesces in such appointment or possession; (iv) files a petition for relief under the United States Bankruptcy Code or any other present or future federal or state insolvency, bankruptcy or similar laws (all of the foregoing hereinafter collectively called “Applicable Bankruptcy Law”) or an involuntary petition for relief is filed against such party under any Applicable Bankruptcy Law and such involuntary petition is not dismissed within sixty (60) days after the filing thereof, or an order for relief naming such party is entered under any Applicable Bankruptcy Law, or any composition, rearrangement, extension, reorganization or other relief of debtors now or hereafter existing is requested or consented to by such party; (v) fails to have discharged within a period of thirty (30) days any attachment, sequestration or similar writ levied upon any property of such party; or (vi) fails to pay within thirty (30) days any final money judgment against such party.

     (g)      If Borrower or any Obligated Party is an entity, the liquidation, dissolution, merger or consolidation of any such entity or, if Borrower or any Obligated Party is an individual, the death or legal incapacity of any such individual.

     (h)      The entry of any judgment against Borrower or the issuance or entry of any attachment or other lien against any of the property of Borrower for an amount in excess of $250,00.00, if undischarged, unbonded or undismissed within thirty (30) days after such entry.

Nothing contained in this Loan Agreement shall be construed to limit the events of default enumerated in any of the other Loan Documents and all such events of default shall be cumulative. The term “Obligated Party”, as used herein, shall mean any party other than Borrower who secures, guarantees and/or is otherwise obligated to pay all or any portion of the indebtedness evidenced by the Notes.

     12.      Remedies. Upon the occurrence of any one or more of the foregoing Events of Default, and upon the expiration of ten (10) days following the giving of notice in accordance with Section 16 hereof with respect to any Event of Default described in subparagraph 11(a) above (provided, however, that no more than two (2) such notices will be given during any calendar year) or upon the expiration of thirty (30) days following the giving of notice by Lender to Borrower in accordance with Section 16 hereof, with respect to any Event of Default described in any of subparagraphs 11(b) through (e), the entire unpaid balance of principal of the Notes, together with all accrued but unpaid interest thereon, and all other indebtedness owing to Lender by Borrower at such time shall, at the option of Lender, become immediately due and payable without further notice, demand, presentation, notice of dishonor, notice of intent to accelerate, notice of acceleration, protest or notice of protest of any kind, all of which are expressly waived by Borrower, and (b) Lender may, at its option, cease further advances under any of the Notes. All rights and remedies of Lender set forth in this Loan Agreement and in any of the other Loan Documents may also be exercised by Lender, at its option to be exercised in its sole discretion, upon the occurrence of an Event of Default.

12

     13.      Rights Cumulative. All rights of Lender under the terms of this Loan Agreement shall be cumulative of, and in addition to, the rights of Lender under any and all other agreements between Borrower and Lender (including, but not limited to, the other Loan Documents), and not in substitution or diminution of any rights now or hereafter held by Lender under the terms of any other agreement.

     14.      Waiver and Agreement. Neither the failure nor any delay on the part of Lender to exercise any right, power or privilege herein or under any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver of any provision in this Loan Agreement or in any of the other Loan Documents and no departure by Borrower therefrom shall be effective unless the same shall be in writing and signed by Lender, and then shall be effective only in the specific instance and for the purpose for which given and to the extent specified in such writing. No modification or amendment to this Loan Agreement or to any of the other Loan Documents shall be valid or effective unless the same is signed by the party against whom it is sought to be enforced.

     15.      Benefits. This Loan Agreement shall be binding upon and inure to the benefit of Lender and Borrower, and their respective successors and assigns, provided, however, that Borrower may not, without the prior written consent of Lender, assign any rights, powers, duties or obligations under this Loan Agreement or any of the other Loan Documents.

     16.      Notices. All notices, requests, demands or other communications required or permitted to be given pursuant to this Agreement shall be in writing and given by (i) personal delivery, (ii) expedited delivery service with proof of delivery, or (iii) United States mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address set forth on the first page hereof and shall be deemed to have been received either, in the case of personal delivery, as of the time of personal delivery, in the case of expedited delivery service, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of mail, upon deposit in a depository receptacle under the care and custody of the United States Postal Service. Either party shall have the right to change its address for notice hereunder to any other location within the continental United States by notice to the other party of such new address at least thirty (30) days prior to the effective date of such new address.

     17.      Construction, Venue. This Loan Agreement and the other Loan Documents have been executed and delivered in the State of Texas, shall be governed by and construed in accordance with the laws of the State of Texas, and shall be performable by the parties hereto in the county in Texas where the Lender’s address set forth on the first page hereof is located. In the event of a dispute involving this Loan Agreement or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Tarrant County, Texas

13

     18.      Invalid Provisions. If any provision of this Loan Agreement or any of the other Loan Documents is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and the remaining provisions of this Loan Agreement or any of the other Loan Documents shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance.

     19.      Expenses. Borrower shall pay all costs and expenses (including, without limitation, reasonable attorneys’ fees) in connection with (i) any action required in the course of administration of the indebtedness and obligations evidenced by the Loan Documents, and (ii) any action in the enforcement of Lender’s rights upon the occurrence of Event of Default.

     20.      Participation of the Loans. Borrower agrees that Lender may, at its option, sell interests in the Loans and its rights under this Loan Agreement to a financial institution or institutions and, in connection with each such sale, Lender may disclose any financial and other information available to Lender concerning Borrower to each prospective purchaser.

     21.      Conflicts. In the event any term or provision hereof is inconsistent with or conflicts with any provision of the other Loan Documents, the terms and provisions contained in this Loan Agreement shall be controlling.

     22.      Counterparts. This Loan Agreement may be separately executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same instrument.

     23.      Facsimile Documents and Signatures. For purposes of negotiating and finalizing this Loan Agreement, if this document or any document executed in connection with it 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 facsimile 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.

If the foregoing correctly sets forth our mutual agreement, please so acknowledge by signing and returning this Loan Agreement to the undersigned.

NOTICE TO COMPLY WITH STATE LAW

For the purpose of this Notice, the term “WRITTEN AGREEMENT” shall include the document set forth above, together with each and every other document relating to and/or securing the same loan transaction, regardless of the date of execution.

14

THIS WRITTEN 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.

BORROWER		LENDER:
CRAFTMADE INTERNATIONAL, INC.,		THE FROST NATIONAL BANK,
a Delaware corporation		a national banking association
By:	/s/ James R. Ridings	By:	/s/ D. Michael Randall
	James R. Ridings, President		D. Michael Randall, Senior Vice President

GUARANTORS   DUROCRAFT INTERNATIONAL, INC., a Texas corporation
By:	/s/ Brad Heimann
	Brad Heimann, Secretary

TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation
By:	/s/ Brad Heimann
	Brad Heimann, Secretary

DESIGN TRENDS, LLC, a Delaware limited liability company
By:	Craftmade International, Inc.,  a Delaware corporation, its Manager
By:	/s/ Brad Heimann
	Brad Heimann, Executive Vice President

C/D/R INCORPORATED, a Delaware corporation
By:	/s/ Clifford Crimmings
	Clifford Crimmings, V.P. Marketing

15

EX-10.2

EXHIBIT 10.2

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

     THIS MODIFICATION, RENEWAL AND EXTENSION AGREEMENT (“Agreement”) is entered into effective as of the 31^st day of October, 2005, by and between THE FROST NATIONAL BANK, a national banking association (“Lender”), and CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (“Borrower”).

R E C I T A L S:

     A.      Lender is the sole owner and holder of that one certain Revolving Promissory Note (the “$20,000,000.00 Note”), dated November 6, 2001, executed by Borrower and payable to the order of Lender in the original principal amount of Twenty Million and No/100 Dollars ($20,000,000.00), as modified by a Modification, Renewal and Extension Agreement entered into October 27, 2003 (the “Modification”).

     B.      Borrower and Lender entered into a Loan Agreement, dated November 6, 2001, as amended by a First Amendment to Loan Agreement, dated effective as of August 13, 2003, as modified by the Modification, as further amended by the Second Amendment to Loan Agreement, dated June 14, 2004, as further amended by a Third Amendment to Loan Agreement, dated February 25, 2005, and as further amended by the Modification, Renewal and Extension Agreement, dated effective as of May 31, 2005 (the “2005 Modification”) (collectively, the “Loan Agreement”).

     C.      Lender is the sole owner and holder of that one certain Promissory Note (the “$3,000,000.00 Note”) dated February 25, 2005, executed by Borrower and payable to the order of Lender in the original principal amount of Three Million and No/100 Dollars ($3,000,000.00), as renewed and extend by a Renewal and Extension Agreement, dated effective March 31, 2005, and as amended by the 2005 Modification.

     D.      The $20,000,000.00 Note and $3,000,000.00 Note are secured by a Security Agreement dated November 6, 2001, between Borrower and Lender, covering certain collateral as more particularly described therein; a Security Agreement dated November 6, 2001, between Trade Source International, Inc., a Delaware corporation, and Lender, covering certain collateral as more particularly described therein; a Security Agreement dated November 6, 2001, between Durocraft International, Inc., a Texas corporation, and Lender, covering certain collateral as more particularly described therein; and a Security Agreement dated November 6,2001, between Design Trends, LLC, a Delaware limited liability company, and Lender, covering certain collateral as more particularly described therein (collectively, the “Security Agreements”). The $20,000,000.00 Note, $3,000,000.00 Note, Loan Agreement, Security Agreements and all modifications, renewals and extensions described below are hereafter collectively referred to as the “Loan Documents.”

     E.      The $20,000,000.00 Note matured in accordance with its terms as of the date hereof.

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT Page 1 of 6

     F.      Borrower has requested that Lender modify certain provisions of the Loan Agreement, all as hereinafter provided, and in consideration thereof Borrower has made certain agreements with Lender as hereinafter more fully set forth.

     G.      Lender has agreed to such requests, subject to the terms and conditions set forth herein.

     NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, Borrower and Lender hereby agree as follows:

     1.      Acknowledgment of Outstanding Balance. The parties hereto acknowledge that the outstanding principal balance of the $3,000,000.00 Note as of October 27, 2005 is ZERO AND NO/100 DOLLARS ($0.00) and $3,000,000.00 is available for draw and the outstanding principal balance of the $20,000,000.00 Note is FIFTEEN MILLION NINE HUNDRED SEVENTY ONE THOUSAND AND NO/100 DOLLARS ($15,971,000.00) and $4,029,000.00 is available for draw.

     2.      Renewal and Extension of Maturity. The $20,000,000.00 Note is hereby renewed and the maturity of the $20,000,000.00 Note is hereby extended to October 31, 2007.

     3.      Required Payments. From and after the effective date of this Agreement, principal and interest under the $20,000,000.00 Note shall be due and payable as follows:

Interest only on amounts outstanding hereunder shall be due and payable monthly as it accrues, on the last day of each and every calendar month, beginning November 30, 2005, and continuing regularly and monthly thereafter until October 31, 2007, when the entire amount hereof, principal and interest then remaining unpaid, shall be then due and payable; interest being calculated on the unpaid principal each day principal is outstanding and all payments made credited to any collection costs and late charges, to the discharge of the interest accrued and to the reduction of the principal, in such order as Lender shall determine.

     4.      Loan Agreement. The Loan Agreement is hereby substituted and replaced with an Amended and Restated Loan Agreement, dated as of the date hereof.

     5.      Usury. No provisions of this Agreement or the Loan Documents shall require the payment or permit the collection, application or receipt of interest in excess of the maximum permitted by applicable state or federal law. If any excess of interest in such respect is herein or in any such other instrument provided for, or shall be adjudicated to be so provided for herein or in any such instrument, the provisions of this paragraph shall govern, and neither Borrower nor any endorsers of the $20,000,000.00 Note or $3,000,000.00 Note nor their respective successors, assigns or personal representatives shall be obligated to pay the amount of such interest to the extent it is in excess of the amount permitted by applicable law. It is expressly stipulated and agreed to be the intent of Borrower and Lender to at all times comply with the usury and other laws relating to the Loan Documents and any subsequent revisions, repeals or judicial interpretations thereof, to the extent applicable thereto. In the event Lender or other holder of the $20,000,000.00

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT Page 2 of 6

Note or $3,000,000.00 Note ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance of the $20,000,000.00 Note or $3,000,000.00 Note and, if upon such application the principal balance of the $20,000,000.00 Note or $3,000,000.00 Note is paid in full, any remaining excess shall be forthwith paid to Borrower and the provisions of the Loan Documents shall immediately be deemed reformed and the amounts thereafter collectible thereunder reduced, without the necessity of execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for thereunder. In determining whether or not the interest paid or payable under any specific contingency exceeds the maximum interest allowed to be charged by applicable law, Borrower and Lender or other holder hereof shall, to the maximum extent permitted under applicable law, amortize, prorate, allocate and spread the total amount of interest throughout the entire term of the $20,000,000.00 Note or $3,000,000.00 Note so that the amount or rate of interest charged for any and all periods of time during the term of the $20,000,000.00 Note or $3,000,000.00 Note is to the greatest extent possible less than the maximum amount or rate of interest allowed to be charged by law during the relevant period of time. Notwithstanding any of the foregoing, if at any time applicable laws shall be changed so as to permit a higher rate or amount of interest to be charged than that permitted prior to such change, then unless prohibited by law, references in the $20,000,000.00 Note or $3,000,000.00 Note to “applicable law” for purposes of determining the maximum interest or rate of interest that can be charged shall be deemed to refer to such applicable law as so amended to allow the greater amount or rate of interest.

     6.      Release and Waiver of Claims. In consideration of (i) the modification of certain provisions of the Note, as herein provided, and (ii) the other benefits received by Borrower hereunder, Borrower hereby RELEASES, RELINQUISHES and forever DISCHARGES Lender, as well as its predecessors, successors, assigns, agents, officers, directors, employees and representatives, of and from any and all claims, demands, actions and causes of action of any and every kind or character, past or present, which Borrower may have against Lender and its predecessors, successors, assigns, agents, officers, directors, employees and representatives arising out of or with respect to (a) any right or power to bring any claim against Lender for usury or to pursue any cause of action against Lender based on any claim of usury, and (b) any and all transactions relating to the Loan Documents occurring prior to the date hereof, including any loss, cost or damage, of any kind or character, arising out of or in any way connected with or in any way resulting from the acts, actions or omissions of Lender, and its predecessors, successors, assigns, agents, officers, directors, employees and representatives, including any breach of fiduciary duty, breach of any duty of fair dealing, breach of confidence, breach of funding commitment, undue influence, duress, economic coercion, conflict of interest, negligence, bad faith, malpractice, intentional or negligent infliction of mental distress, tortious interference with contractual relations, tortious interference with corporate governance or prospective business advantage, breach of contract, deceptive trade practices, libel, slander or conspiracy, but in each case only to the extent permitted by applicable law.

     7.      Reaffirmation of Representations, Etc. Borrower hereby reaffirms to Lender each of the representations, warranties, covenants and agreements of Borrower set forth in the Loan Documents.

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT Page 3 of 6

     8.      Enforceable Obligations. Borrower hereby ratifies, affirms, reaffirms, acknowledges, confirms and agrees that the Loan Documents represent valid and enforceable obligations of Borrower, and Borrower further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to the $20,000,000.00 Note and $3,000,000.00 Note, and Borrower further acknowledges and represents that no event has occurred and no condition exists which would constitute a default under the Loan Documents or this Agreement, either with or without notice or lapse of time, or both.

     9.      No Release of Liens. This Agreement in no way acts as a release or relinquishment of the liens, security interests and rights (the “Liens”) created or evidenced by the Security Agreements. The Liens are hereby ratified and confirmed by Borrower in all respects and are extended to secure (i) the principal amount of the $20,000,000.00 Note and $3,000,000.00 Note, (ii) all interest, charges and other sums payable with respect thereto, and (iii) the performance of all other obligations under the Security Agreements.

     10.      Additional Renewals and Extensions. Notwithstanding anything to the contrary contained herein or inferred hereby or in any other instrument executed by Borrower or in any other action or conduct undertaken by Borrower on or before the date hereof, the agreements, covenants and provisions contained herein shall constitute the only evidence of Lender’s consent to extend the terms and provisions of the Loan Documents in the manner set forth herein. No express or implied consent to any further extensions and/or modifications involving any of the matters set forth in this Agreement or otherwise, shall be inferred or implied from Lender’s execution of this Agreement. Further, Lender’s execution of this Agreement shall not constitute a waiver (either express or implied) of the requirement that any further extensions and/or modifications of the Loan Documents shall require the express written approval of Lender, no such approval (either express or implied) having been given as of the date hereof.

     11.      Miscellaneous. (a) As modified hereby, the provisions of the $20,000,000.00 Note and $3,000,000.00 Note and the Security Agreements shall continue in full force and effect, and the Borrower acknowledges and reaffirms its liability to Lender thereunder. In the event of any inconsistency between this Agreement and the terms of the Loan Documents, this Agreement shall govern.

     (b)      Borrower hereby agrees to pay all costs and expenses incurred by Lender in connection with the execution and administration of this Agreement and the modification of the Loan Documents including, but not limited to, all appraisal costs, title insurance costs, legal fees incurred by Lender and filing fees.

     (c)      Any default by Borrower in the performance of its obligations herein contained shall constitute a default under the Loan Documents and shall allow Lender to exercise all of its remedies set forth in the Loan Documents.

     (d)      Lender does not, by its execution of this Agreement, waive any rights it may have against any person not a party to this Agreement.

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT Page 4 of 6

     (e)      In case any of the provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

     (f)      This Agreement and the Loan Documents shall be governed and construed according to the laws of the State of Texas (without regard to any conflict of laws principles) and the applicable laws of the United States.

     (g)      This Agreement shall be binding upon and inure to the benefit of Lender, Borrower and their respective successors, assigns and legal representatives.

     (h)      Borrower hereby acknowledges and agrees that it has entered into this Agreement of its own free will and accord and in accordance with its own judgment after advice of its own legal counsel, and states that it has not been induced to enter into this Agreement by any statement, act or representation of any kind or character on the part of the parties hereto, except as expressly set forth in this Agreement.

     (i)      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.

     (j)      Except as modified herein, all other terms, conditions and provisions of Loan Documents shall remain in full force and effect as of the date thereof and Borrower acknowledges and reaffirms its liability to Lender thereunder.

     EXECUTED as of the day and year first above written.

BORROWER: CRAFTMADE INTERNATIONAL, INC., a Delaware corporation
By:	/s/ Brad Heimann
	Brad Heimann, Executive Vice President

LENDER: THE FROST NATIONAL BANK, a national banking association
By:	/s/ D. Michael Randall
	D. Michael Randall, Senior Vice President

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT Page 5 of 6

Guarantor Ratification of Agreement

     By executing this Agreement, DUROCRAFT INTERNATIONAL, INC., a Texas corporation; TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation; DESIGN TRENDS, LLC, a Delaware limited liability company; and C/D/R INCORPORATED, a Delaware corporation, as Guarantors of the indebtedness evidenced by the $20,000,000.00 Note and $3,000,000.00 Note, as set forth in Guaranty Agreements (collectively, the “Guarantys”) dated November 6, 2001, hereby expressly agree (a) to all of the terms and provisions of this Agreement, (b) to the continuing validity of the Guarantys and all duties and obligations thereunder, (c) that their liability under the Guarantys shall not be reduced, altered, limited, lessened or in any way affected by the execution and delivery of this Agreement by the parties hereto, and (d) that the Guarantys shall remain in full force and effect and enforceable in accordance with their terms.

DUROCRAFT INTERNATIONAL, INC., a Texas corporation
By:	/s/ Brad Heimann
	Brad Heimann, Secretary

TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation
By:	/s/ Brad Heimann
	Brad Heimann, Secretary

DESIGN TRENDS, LLC, a Delaware limited liability company
By:	Craftmade International, Inc.,;nbsp;
	a Delaware corporation, its Manager
By:	/s/ Brad Heimann
	Brad Heimann, Executive Vice President

C/D/R INCORPORATED, a Delaware corporation
By:	/s/ Clifford Crimmings
	Clifford Crimmings, V.P. Marketing

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT Page 6 of 6