<SUBMISSION>
<ACCESSION-NUMBER>0000950134-02-001215
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20011231
<FILING-DATE>20020214
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CRAFTMADE INTERNATIONAL INC
<CIK>0000856250
<ASSIGNED-SIC>5064
<IRS-NUMBER>752057054
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0630
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-26667
<FILM-NUMBER>02543100
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>650 S ROYAL LANE SUITE 100
<CITY>COPPELL
<STATE>TX
<ZIP>75050
<PHONE>9723933800
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>CRAFTMADE INTERNATIONAL INC
<STREET2>650 S ROYAL LANE SUITE 100
<CITY>COPPELL
<STATE>TX
<ZIP>75050
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d94098e10-q.txt
<DESCRIPTION>FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 2001
<TEXT>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2001 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM          TO
                                           --------    --------

Commission File Number
----------------------
      000-26667

                          CRAFTMADE INTERNATIONAL, INC.
                          -----------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                              75-2057054
           --------                                              ----------
(State or other jurisdiction                                  (I.R.S. Employer
of incorporation or organization)                            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
                                                   --------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x].      No [ ].

5,955,058 shares of Common Stock were outstanding as of January 31, 2002.



<PAGE>

                  CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES

                     Index to Quarterly Report on Form 10-Q



Part I.  Financial Information

         Item 1.  Financial Statements (unaudited)

                  Condensed Consolidated Statements of Income for the three and
                  six months ended December 31, 2001 and 2000.

                  Condensed Consolidated Balance Sheets as of December 31, 2001
                  and June 30, 2001.

                  Condensed Consolidated Statements of Cash Flows for the six
                  months ended December 31, 2001 and 2000.

                  Notes to Condensed Consolidated Financial Statements.

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk



Part II. Other Information

         Item 1.  Legal Proceedings
         Item 2.  Changes in Securities and Use of Proceeds
         Item 3.  Defaults Upon Senior Securities
         Item 4.  Submission of Matters to a Vote of Stockholders
         Item 5.  Other Information
         Item 6.  Exhibits and Reports on Form 8-K



                                       2
<PAGE>

                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME


<Table>
<Caption>
                                    FOR THE THREE MONTHS ENDED    FOR THE SIX MONTHS ENDED
                                    --------------------------    ------------------------
                                     December        December      December      December
                                     31, 2001        31, 2000      31, 2001      31, 2000
                                    ----------      ----------    ----------    ----------
                                             (In thousands except per share data)
<S>                                 <C>             <C>           <C>           <C>
Net Sales                           $   23,045      $   19,009    $   54,804    $   43,016
Cost of goods sold                      15,649          12,781        38,657        29,502
                                    ----------      ----------    ----------    ----------

Gross profit                             7,396           6,228        16,147        13,514
                                    ----------      ----------    ----------    ----------

Selling, general and
     administrative expenses             4,483           3,817         9,009         7,671
Interest expense, net                      354             525           837         1,114
Depreciation and amortization              137             230           272           455
                                    ----------      ----------    ----------    ----------

         Total Expenses                  4,974           4,572        10,118         9,240
                                    ----------      ----------    ----------    ----------

Income before income taxes
     and minority interest               2,422           1,656         6,029         4,274

Provision for income taxes                 625             544         1,714         1,364
                                    ----------      ----------    ----------    ----------

Income before minority interest          1,797           1,112         4,315         2,910

Minority interest                         (677)           (311)       (1,238)         (685)
                                    ----------      ----------    ----------    ----------


Net income                          $    1,120      $      801    $    3,077    $    2,225
                                    ==========      ==========    ==========    ==========

Basic earnings per common share     $     0.19      $     0.14    $     0.52    $     0.37
                                    ==========      ==========    ==========    ==========

Diluted earnings per common share   $     0.19      $     0.14    $     0.51    $     0.37
                                    ==========      ==========    ==========    ==========


Cash dividends declared
  per common share                  $     0.07      $     0.07    $     0.14    $     0.11
                                    ==========      ==========    ==========    ==========
</Table>



                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS



                                       3
<PAGE>

                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS

<Table>
<Caption>
                                         December 31,      June 30,
                                             2001            2001
                                         ------------    ------------
                                         (Unaudited)

                                                (In thousands)
<S>                                      <C>             <C>
Current assets:
     Cash                                $      2,818    $      1,638
     Accounts receivable - net of
         allowance of $150,000                 12,265          19,215
     Inventory                                 16,435          19,454
     Deferred income taxes                        758             758
     Prepaid expenses and other
         current assets                         1,072           1,149
                                         ------------    ------------

     Total current assets                      33,348          42,214


Property and equipment, net
     Land                                       1,535           1,535
     Building                                   7,784           7,784
     Office furniture and equipment             8,058           5,651
     Leasehold improvements                       273             273
                                         ------------    ------------
                                               17,650          15,243

Less: accumulated depreciation                 (4,092)         (3,102)
                                         ------------    ------------

     Total property and equipment, net         13,558          12,141

Goodwill, net of accumulated
     amortization of $1,204,000                 4,735           4,735
Other assets                                       12              39
                                         ------------    ------------

     Total other assets                         4,747           4,774
                                         ------------    ------------

Total assets                             $     51,653    $     59,129
                                         ============    ============
</Table>

                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS



                                       4
<PAGE>

                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<Table>
<Caption>
                                                      December 31,      June 30,
                                                          2001            2001
                                                      ------------    ------------
                                                      (Unaudited)

                                                             (In thousands)
<S>                                                   <C>             <C>
Current liabilities:
    Note payable - current                            $        605    $        512
    Revolving lines of credit                               13,530          20,600
    Accounts payable                                         3,450           6,551
    Commissions payable                                        231             455
    Income taxes payable                                        --             934
    Accrued liabilities                                      4,319           2,929
                                                      ------------    ------------
          Total current liabilities                         22,135          31,981

Other non-current liabilities:
    Deferred income taxes                                      241             241
    Note payable - long term                                 6,959           8,105
    Minority interest                                        1,911           1,049
                                                      ------------    ------------

    Total liabilities                                       31,246          41,375
                                                      ------------    ------------
Stockholders' equity:
    Series A cumulative, convertible
         callable preferred stock, $1.00
         par value, 2,000,000 shares
         authorized; 32,000 shares issued                       32              32
    Common stock, $.01 par value,
         15,000,000 shares authorized,9,384,535 and
         9,326,535 shares issued, respectively                  94              93
Additional paid-in capital                                  13,074          12,683
Unearned deferred compensation                                 (92)           (108)
Retained earnings                                           28,131          25,886
                                                      ------------    ------------
                                                            41,239          38,586
    Less: treasury stock, 3,429,477
         common shares at cost, and 32,000
         preferred shares at cost                          (20,832)        (20,832)
                                                      ------------    ------------
          Total Stockholders' Equity                        20,407          17,754
                                                      ------------    ------------

Total liabilities and stockholders' equity            $     51,653    $     59,129
                                                      ============    ============
</Table>

                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS



                                       5
<PAGE>

                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<Table>
<Caption>
                                                        FOR THE SIX MONTHS ENDED
                                                       ---------------------------
                                                        December         December
                                                        31, 2001         31, 2000
                                                       ----------       ----------
                                                   (In thousands except per share data)
<S>                                                <C>                  <C>
Net cash provided by operating
activities:                                            $   12,536       $    6,655
                                                       ----------       ----------

Cash flows from investing activities:
      Net additions to equipment                           (2,418)            (360)
                                                       ----------       ----------
Net cash used for investing activities                     (2,418)            (360)
                                                       ----------       ----------

Cash flows from financing activities:
      Net proceeds from lines of credit                    (7,070)          (1,600)
      Principal payments for note payable                  (1,052)            (229)
      Stock repurchase                                         --           (2,559)
      Stock options exercised                                 392               --
      Cash dividends                                         (832)            (631)
      Distributions to minority interest members             (376)            (272)
                                                       ----------       ----------
Net cash used for financing activities                     (8,938)          (5,291)
                                                       ----------       ----------
Net increase in cash                                        1,180            1,004
Cash at beginning of period                                 1,638            1,171
                                                       ----------       ----------
Cash at end of period                                  $    2,818       $    2,175
                                                       ==========       ==========
</Table>



                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS



                                       6
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        OF CRAFTMADE INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                                DECEMBER 31, 2001
                                   (Unaudited)


Note 1 - BASIS OF PREPARATION AND PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and include all adjustments which are, in the opinion of management, necessary
for a fair presentation. The condensed consolidated financial statements include
the accounts of the Company and its subsidiaries. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading;
however, it is suggested that these financial statements be read in conjunction
with the financial statements and the notes thereto which are incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2001. The financial data for the interim periods may not necessarily be
indicative of results to be expected for the year.

Certain amounts for the three and six months ended December 31, 2000 have been
reclassified to conform with the current quarter and six months' presentation.

                                       7
<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        OF CRAFTMADE INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                                December 31, 2001
                                   (Unaudited)
                                 (In Thousands)


Note 2 - EARNINGS PER SHARE

The following is a reconciliation of the numerator and denominator used in the
basic and diluted EPS calculations:

<Table>
<Caption>
                         FOR THE THREE MONTHS ENDED    FOR THE SIX MONTHS ENDED
                         --------------------------    -------------------------
                          December       December       December       December
                          31, 2001       31, 2000       31, 2001       31, 2000
                         ----------     -----------     ----------     ----------
                                  (In thousands except per share data)
<S>                      <C>            <C>            <C>            <C>
Basic and
Diluted EPS

Numerator:
Net Income               $    1,120     $      801     $    3,077     $    2,225
                         ----------     ----------     ----------     ----------

Denominator:
Common
Shares
Outstanding                   5,931          5,903          5,917          5,980

Basic EPS                $     0.19     $     0.14     $     0.52     $     0.37
                         ==========     ==========     ==========     ==========


Denominator:
Common
Shares
Outstanding                   5,931          5,903          5,917          5,980
Options                          58             13             65              6
                         ----------     ----------     ----------     ----------
Total Shares                  5,989          5,916          5,982          5,986
                         ==========     ==========     ==========     ==========

Diluted EPS              $     0.19     $     0.14     $     0.51     $     0.37
                         ==========     ==========     ==========     ==========
</Table>



                                       8
<PAGE>

Note 3 - DERIVATIVE FINANCIAL INSTRUMENT

The Company records all derivative instruments on the balance sheet at fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, depending
on the type of hedge transaction. For fair-value hedge transactions in which the
Company is hedging changes in an asset's, liability's, or firm commitment's fair
value, changes in the fair value of the derivative instrument will generally be
offset in the income statement by changes in the hedged item's fair value. For
cash-flow hedge transactions in which the Company is hedging the variability of
cash flows related to a variable-rate asset, liability, or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are impacted by the variability of
the cash flows of the hedged item. The ineffective portion of all hedges will be
recognized in current-period earnings.

During the first quarter of fiscal 2000, the Company entered into an interest
rate swap agreement, with a maturity of December 29, 2003, to manage its
exposure to interest rate movements by effectively converting its long-term
facility debt from fixed to variable rates. The swap was designated as a fair
value hedge. In November 2001, the Company and its counterparty agreed to
terminate the swap agreement prior to its scheduled maturity. In return for the
early termination of the interest rate swap, the Company received $61,500 in
cash. Accordingly, the fair value of the swap agreement was offset and the
adjustment to the fair value of the related debt will be amortized over the
remaining term of the long-term debt facility. Total amortization for the second
quarter of fiscal 2002 totaled approximately $1,300. The unamortized balance of
the adjustment to the fair value of the related debt totaled $60,200 at December
31, 2001.



                                       9
<PAGE>

Note 4 - SEGMENT INFORMATION

The Company has two reportable segments, Craftmade and Trade Source
International, Inc. ("TSI"). The Company is organized on a combination of
product type and customer base. The Craftmade segment primarily derives its
revenue from home furnishings including ceiling fans, light kits, bathstrip
lighting and lamps offered primarily through lighting showrooms, certain major
retail chains and catalog houses. The TSI segment derives its revenue from
outdoor lighting, portable lamps, indoor lighting and fan accessories marketed
solely to mass merchandisers.

The accounting policies of the segments are the same as those described in Note
2 - Summary of Significant Accounting Policies to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2001. The Company evaluates the
performance of its segments and allocates resources to them based on their
operating profit and loss and cash flows.

The following table presents information about the reportable segments (in
thousands):

<Table>
<Caption>
                                      Craftmade        TSI          Total
                                      ---------     ---------     ---------
<S>                                   <C>           <C>           <C>
For the three months ended
December 31, 2001:
------------------
Net sales from external customers     $  11,549     $  11,496     $  23,045
Operating profit                          1,656         1,120         2,776

For the three months ended
December 31, 2000:
------------------
Net sales from external customers     $  11,113     $   7,896     $  19,009
Operating profit                          1,487           694         2,181

For the six months ended
December 31, 2001:
------------------
Net sales from external customers     $  24,976     $  29,828     $  54,804
Operating profit                          3,709         3,157         6,866

For the six months ended
December 31, 2000:
------------------
Net sales from external customers     $  23,964     $  19,052     $  43,016
Operating profit                          3,346         2,042         5,388
</Table>



                                       10
<PAGE>

Note 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

Effective July 1, 2001, the Company adopted Statement on Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill and intangible assets with
indefinite lives, including such assets recorded in past business combinations,
ceased upon adoption. Thus, no amortization was recognized in the accompanying
consolidated statements of income for the three and six months ended December
31, 2001 compared to $105,000 and $210,000 for the same periods of the prior
year, respectively. On an annual basis, and when there is reason to suspect that
their values have been diminished or impaired, these assets must be tested for
impairment, and a write-down may be necessary. SFAS 142 allows up to six months
from the date of adoption to complete the initial goodwill impairment test. The
Company does not believe its goodwill is impaired at December 31, 2001.


ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Cautionary Statement

With the exception of historical information, the matters discussed in this
document contain forward-looking statements. There are certain important factors
which could cause results to differ materially from those anticipated by these
forward-looking statements. Some of the important factors which would cause
actual results to differ materially from those in the forward-looking statements
include, among other things, the success of Design Trends' portable lamp
program, the relationship of Design Trends with its primary mass merchandiser
customer, changes in anticipated levels of sales, whether due to future national
or regional economic and competitive conditions, changes in relationships with
customers, TSI's dependence on select mass merchandisers, customer acceptance of
existing and new products, pricing pressures due to excess capacity, cost
increases, changes in tax or interest rates, unfavorable economic and political
developments in Asia, the location of the Company's primary vendors, declining
conditions in the home construction industry, inability to realize deferred tax
assets, and other uncertainties, all of which are difficult to predict and many
of which are beyond the control of the Company.



                                       11
<PAGE>

Results of Operations

Three Months Ended December 31, 2001 Compared to Three Months Ended December 31,
2000.

Net Sales. Net sales for the Company increased $4,036,000, or 21.2%, to
$23,045,000 for the three month period ended December 31, 2001 from $19,009,000
for the same three month period last year. Net sales from the Craftmade division
increased $436,000, or 3.9%, to $11,549,000 for the three months ended December
31, 2001 from $11,113,000 for the same three month period last year. The
increase in sales of the Craftmade division was partially due to an increase in
Craftmade's sales of outdoor lighting which generated incremental revenue of
$250,000 compared to the prior year period. In addition, Craftmade's ceiling fan
sales increased 2.5% compared to the same period of the previous year. Net sales
of the TSI division increased $3,600,000, or 45.6%, to $11,496,000 for the three
months ended December 31, 2001 from $7,896,000 for the same three month period
last year. The increase was primarily attributable to sales generated by Design
Trends, LLC ("Design Trends"), the Company's 50% owned subsidiary, which
introduced a new line of portable lamps to a mass merchant in March 2000. The
continued roll out of this new product generated $3,512,000 in incremental
revenue during the quarter ended December 31, 2001.

Gross Profit. Gross profit of the Company as a percentage of sales declined to
32.1% of net sales for the three months ended December 31, 2001, compared to
32.8% for the same period of 2000. The gross margin of the Craftmade division
increased to 39.7% of sales from 37.9% of sales in the year ago period. The
improvement in the gross margin of the Craftmade division was due primarily to a
series of price concessions the Company negotiated with its ceiling fan vendor,
which have, in part, been passed on to customers. The improvement in the
exchange rate of the U.S. dollar relative to the Taiwanese dollar also had a
favorable impact on the gross margin of the showroom division. This improvement
was partially offset by an inventory write down of certain bathstrip and outdoor
lighting products in the amount of $200,000, or $0.02 per share, net of taxes.
The gross margin of the TSI division declined to 24.5% of sales for the three
months ended December 31, 2001 compared to 25.5% of sales in the year ago
period. The decline in the gross margin was related to a shift in the sales mix,
with a greater portion of revenue being generated by Design Trends' business
which carries a lower gross margin than other products of the TSI division.



                                       12
<PAGE>

Selling, General and Administrative Expenses. Total selling, general and
administrative ("SG&A") expenses of the Company increased $666,000 to $4,484,000
or 19.5% of net sales for the three months ended December 31, 2001 from
$3,818,000 or 20.1% of net sales for the same three month period last year.
Total SG&A expenses of the Craftmade division increased $182,000 to $2,814,000
or 24.4% of sales compared to $2,632,000 or 23.7% of sales for the same period
in the previous period. The increase in SG&A expenses of the Craftmade division
was primarily related to increased payroll costs associated with the
implementation of the Company's logistics and accounting systems upgrade. Total
SG&A expenses of the TSI division increased $484,000 to $1,670,000 or 14.5% of
sales compared to $1,186,000 or 15.0% of sales for the same period in the
previous year. The improvement in TSI's SG&A expenses as a percentage of sales
was related to the effect of increased revenue leveraging down fixed SG&A
expenses.

Interest Expense. Net interest expense of the Company decreased $171,000 to
$354,000 for the three months ended December 31, 2001 from $525,000 for the same
three-month period last year. This improvement was primarily the result of a
decrease in the outstanding balance of the Company's revolving lines of credit,
combined with lower interest rates in effect during the period.

Minority Interest. Minority interest of $677,000 and $311,000 for the three
months ended December 31, 2001 and 2000, respectively, represented the 50%
ownership of Prime/Home Impressions, LLC ("PHI") and Design Trends by
non-Company owned members. The non-Company owned interests have been accounted
for as minority interest.

Provision For Income Taxes. The provision for income taxes increased to $625,000
or 35.8% of net income before taxes but after minority interest expense, for the
three months ended December 31, 2001, from $544,000 or 40.4% for the same period
of the prior year. The decrease in the effective rate relates to a decrease in
non-deductible expenses, primarily amortization of goodwill, as a percentage of
pretax income.

Results of Operations

Six Months Ended December 31, 2001 Compared to Six Months Ended December 31,
2000

Net Sales. Net sales for the Company increased $11,788,000, or 27.4%, to
$54,804,000 for the six month period ended December 31, 2001 from $43,016,000
for the same six month period last year. Net sales of the Craftmade division
increased $1,012,000, or 4.2%, to $24,976,000 for the six months ended December
31, 2001 from



                                       13
<PAGE>

$23,964,000 for the same six month period last year. The increase in sales of
the Craftmade division was partially due to an increase in sales of outdoor
lighting which generated incremental revenue of $546,000. In addition,
Craftmade's ceiling fan sales increased 2.9% compared to the same period of the
previous year. Net sales of the TSI division increased $10,776,000, or 56.6%, to
$29,828,000 for the six months ended December 31, 2001 from $19,052,000 for the
same six month period last year. The increase was primarily attributable to
sales generated by Design Trends. The continued roll out of Design Trends' new
portable lamp product line generated $10,462,000 in incremental revenue during
the six months ended December 31, 2001.

Gross Profit. Gross profit of the Company as a percentage of sales decreased to
29.5% of net sales for the six months ended December 31, 2001 compared to 31.4%
for the same period of 2000. The gross margin of the Craftmade division
increased to 38.4% of sales from 37.2% of sales in the year ago period. The
improvement in the gross margin of the Craftmade division was due primarily to a
series of price concessions the Company negotiated with its ceiling fan vendor,
which have, in part, been passed on to customers. The improvement in the
exchange rate of the U.S. dollar relative to the Taiwanese dollar also had a
favorable impact on the gross margin of the showroom division. This improvement
was partially offset by an inventory write down of certain bathstrip and outdoor
lighting products in the amount of $200,000, or $0.02 per share, net of taxes.
The gross margin of the TSI division declined to 21.9% of sales for the six
months ended December 31, 2001 compared to 24.1% of sales in the year ago
period. The decline in the gross margin was related to a shift in the sales mix,
with a greater portion of revenue being generated by Design Trends' business
which carries a lower gross margin than other products of the TSI division.

Selling, General and Administrative Expenses. Total selling, general and
administrative ("SG&A") expenses of the Company increased $1,338,000 to
$9,009,000 or 16.4% of net sales for the six months ended December 31, 2001 from
$7,671,000 or 17.8% of net sales for the same six month period last year. Total
SG&A expenses of the Craftmade division increased $290,000 to $5,672,000 or
22.7% of sales compared to $5,382,000 or 22.5% of sales for the same period in
the previous period. The increase in SG&A expense dollars of Craftmade is
primarily attributable to increases in commissions and certain other costs
directly correlated to the sales increase experienced by Craftmade. Total SG&A
expenses of the TSI division increased $1,048,000 to $3,337,000 or 11.2% of
sales from $2,289,000 or 12.0% of sales for the same period in the previous
year. The improvement in TSI's SG&A expenses as a percentage of sales was
related to the effect of increased revenue leveraging down fixed SG&A expenses.



                                       14
<PAGE>

Interest Expense. Net interest expense of the Company decreased $277,000 to
$837,000 for the six months ended December 31, 2001 from $1,114,000 for the same
three month period last year. This improvement was primarily the result of a
decrease in the outstanding balance of the Company's revolving lines of credit,
combined with lower interest rates in effect during the period.

Minority Interest. Minority interest of $1,238,000 and $685,000 for the six
months ended December 31, 2001 and 2000, respectively, represented the 50%
ownership of PHI and Design Trends by non-Company owned members. The non-Company
owned interests have been accounted for as minority interest.

Provision for Income Taxes. The provision for income taxes increased to
$1,714,000 or 35.8% of net income before taxes but after minority interest
expense, for the six months ended December 31, 2001, from $1,365,000 or 38.0%
for the same period of the prior year. The decrease in the effective rate
relates to a decrease in non-deductible expenses, primarily amortization of
goodwill, as a percentage of pretax income.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash increased $1,180,000 from $1,638,000 at June 30, 2001 to
$2,818,000 at December 31, 2001. The Company's operating activities provided
cash of $12,536,000 primarily attributable to the Company's net income from
operations, collections on customer accounts and reduced inventory levels.

In order to satisfy anticipated demand for Design Trends' portable lamp program,
the Company maintains an inventory for Design Trends of approximately $3.1
million as of December 31, 2001. Currently, this program is primarily with one
mass merchandiser customer. Should the terms of the program with this particular
mass merchandiser be at a level less than originally anticipated the Company
would be required to find other customers for this inventory. There can be no
assurances that the alternative sources would generate similar sales levels and
profit margins as anticipated with the current customer.

The $2,418,000 of cash used for investing activities related primarily to
additions to property and equipment associated with Design Trends' portable lamp
program as well as expenditures associated with the implementation of the
Company's logistics and accounting systems upgrade.

The $8,938,000 of cash used for financing activities was primarily the result of
(i) distributions to PHI's minority interest members of $376,000, (ii) principal
payments of $1,052,000 on the Company's



                                       15
<PAGE>
note payable, (iii) cash dividends of $832,000, and (iv) principal payments of
$7,070,000 on the Company's lines of credit. These amounts were partially offset
by proceeds of $392,000 received from stock options exercised.

On November 6, 2001, the Company entered into a Credit Agreement with The Frost
National Bank ("Frost"), pursuant to which Frost agreed to provide the Company
with a $20,000,000 line of credit. The Credit Agreement with Frost replaced the
Company's existing $20,000,000 line of credit with J.P. Morgan Chase & Co.
("Chase") and Frost. The terms of the Company's new line of credit with Frost
are substantially identical to the Company's preceding line of credit. The
Company chose to obtain its line of credit solely from Frost, rather than a
syndicate of Frost and Chase, because the Company currently maintains its
banking accounts with Frost, and the use of Frost exclusively will permit the
Company to facilitate more rapid payments with respect to the line of credit,
which the Company believes will result in a reduction of interest expense.

At December 31, 2001, subject to continued compliance with certain covenants and
restrictions, the Company had $20,000,000 available on its lines of credit, of
which $12,000,000 had been utilized. In addition, PHI had $3,000,000 available
on its line of credit at December 31, 2001, of which $1,530,000 had been
utilized. The Company's management believes that its current lines of credit,
combined with cash flows from operations, are adequate to fund the Company's
current operating needs, make annual payments of approximately $1,200,000 under
the note payable, fund anticipated capital expenditures of approximately
$2,000,000, as well as fund its projected growth over the next twelve months.

At December 31, 2001, $7,504,000 remained outstanding under the twelve year note
payable for the Company's 378,000 square foot operating facility. The Company's
management believes that this facility will be sufficient for its purposes for
the foreseeable future.


ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information set forth below constitutes a "forward looking statement." See
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statement.

As a result of the terms of the Company's note payable on its operating
facility, the Company is subject to market risk associated with adverse changes
in interest rates. In an effort to reduce this market risk, the Company entered
into an interest rate



                                       16
<PAGE>
swap agreement (the "Swap Agreement") with during the first quarter of fiscal
2000, which was held by the Company for non-trading purposes.

In November 2001, the Company transferred its line of credit from Chase to
Frost. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources." In connection with
this transfer, the Company and Chase agreed to terminate the Swap Agreement, and
Chase paid the Company $61,500 in connection with this termination.

At December 31, 2001, the Company had a $20,000,000 line of credit (the
"Craftmade Line of Credit") with Frost at an interest rate of prime less .5%, of
which $12,000,000 was outstanding. At December 31, 2001 the prime rate was equal
to 4.75%. The Craftmade Line of Credit is due on demand; however, if no demand
is made, it is scheduled to mature October 31, 2003.

In addition, at December 31, 2001, PHI had a $3,000,000 line of credit (the "PHI
Line of Credit") with Wachovia Bank, N.A. at an interest rate of the one-month
LIBOR plus 2%, of which $1,530,000 was outstanding. At December 31, 2001 the
one-month LIBOR rate was equal to 1.87% The PHI Line of Credit is due on demand;
however, if no demand is made, it is scheduled to mature March 2, 2002.

Because of the short-term nature of each of the Craftmade Line of Credit and the
PHI Line of Credit, the Company is subject to market risk associated adverse
changes in interest rates. A sharp rise in interest rates could materially
adversely affect the financial condition and results of operations of the
Company. The Company has not entered into any instruments to minimize this
market risk of adverse changes in interest rates because the Company believes
the cost associated with such instruments would outweigh the benefits that would
be obtained from utilizing such instruments.

Under the Craftmade Line of Credit, for each one percentage point (1%)
incremental increase in the prime rate, the Company's annualized net interest
expense would increase by approximately $120,000. Consequently, an increase in
the prime rate of five percentage points (5%) would result in an estimated
annualized increase of interest expense for the Company of approximately
$600,000.

Under the PHI Line of Credit, for each one percentage point (1%) incremental
increase in LIBOR, the Company's annualized net interest expense would increase
by approximately $15,000. Consequently, an increase in LIBOR of five percentage
points (5%) would result in an estimated annualized increase of interest expense
for the Company of approximately $75,000.



                                       17
<PAGE>
The Company currently purchases a substantial amount of ceiling fans and other
products of its Craftmade division from Fanthing, a Taiwanese company. The
Company's verbal understanding with Fanthing provides that all transactions are
to be denominated in U.S. dollars; however, the understanding further provides
that, in the event that the value of the U.S. dollar appreciates or depreciates
against the Taiwanese dollar by one Taiwanese dollar or more, Fanthing's prices
will be accordingly adjusted by 2.5%. As of February 13, 2002, one U.S. dollar
equalled 35.04 Taiwanese dollars. A sharp appreciation of the Taiwanese dollar
relative to the U.S. dollar could materially adversely affect the financial
condition and results of operations of the Company. The Company has not entered
into any instruments to minimize this market risk of adverse changes in currency
rates because the Company believes the cost associated with such instruments
would outweigh the benefits that would be obtained from utilizing such
instruments. All other purchases of the Company from foreign vendors are
denominated in U.S. dollars and are not subject to adjustment provisions with
respect to foreign currency fluctuations. As a result, the Company does not
believe that it is subject to any material foreign currency exchange risk with
respect to such purchases.

During the fiscal quarter ended December 31, 2001, the Company purchased
approximately $4,679,000 of products from Fanthing. Under the Company's
understanding with Fanthing, each $1 incremental appreciation of the Taiwanese
dollar would result in an estimated annualized net increase in cost of good sold
of approximately $468,000, based on the Company's purchases during the fiscal
quarter ended December 31, 2001 (on an annualized basis). A $5 incremental
appreciation of the Taiwanese dollar would result in an estimated annualized
increase in cost of goods sold of approximately $2,340,000, based on the
Company's purchases during the fiscal quarter ended December 31, 2001 (on an
annualized basis). A $10 incremental appreciation of the Taiwanese dollar would
result in an increase of approximately $4,680,000 on an annualized basis, based
on the Company's purchases during the fiscal quarter ended December 31, 2001 (on
an annualized basis). These amounts are estimates of the financial impact of an
appreciation of the Taiwanese dollar relative to the U.S. dollar and are based
on annualizations of the Company's purchases from Fanthing for the fiscal
quarter ended December 31, 2001. Consequently, these amounts are not necessarily
indicative of the effect of such changes with respect to an entire year.



                                       18
<PAGE>

                                     PART II

                                OTHER INFORMATION


Item 1.           Legal Proceedings

                  not applicable

Item 2.           Changes in Securities and Use of Proceeds

                  On October 29, 2001, the Company purchased 192 shares of
                  common stock for the account of each of its non-employee
                  directors, Jerry Kimmel, Lary Snodgrass and Paul Knuckley, as
                  part of such non-employee directors' services provided to the
                  company as directors. These shares of common stock were
                  acquired by the non-employee directors pursuant to private
                  placement exemptions, including Section 4(2), of the
                  Securities Act of 1933, as amended.

Item 3.           Defaults Upon Senior Securities

                  not applicable

Item 4.           Submission of Matters to a Vote of Stockholders

At the annual meeting of the Company's stockholders on October 25, 2001, the
stockholders of the Company (i) elected James R. Ridings, Clifford Crimmings,
Kathleen B. Oher, A. Paul Knuckley, Jerry E. Kimmel, Neall W. Humphrey, John
DeBlois and Lary C. Snodgrass as directors of the Company; and (ii) ratified the
appointment of PricewaterhouseCoopers LLP as independent auditors for 2002.

The vote in the election of directors was as follows:

<Table>
<Caption>
                                Number of Votes      Number of Votes         Abstentions
                                of Common Stock      of Common Stock             and
                                       For               Withheld         Broker Non-Votes
                                ----------------     ----------------     ----------------
<S>                             <C>                  <C>                  <C>
James Ridings                          3,426,550               89,225                   --
Clifford Crimmings                     3,426,550               89,225                   --
Kathleen B. Oher                       3,477,350               38,425                   --
A. Paul Knuckley                       3,477,350               38,425                   --
Jerry E. Kimmel                        3,426,550               89,225                   --
Neall W. Humphrey                      3,426,550               89,225                   --
John DeBlois                           3,426,550               89,225                   --
Lary C. Snodgrass                      3,477,350               38,425                   --
</Table>

The vote in the ratification of PricewaterhouseCoopers LLP as independent
auditors for the fiscal year ending June 30, 2002 was 3,515,765 for, 10 against,
and 0 abstentions and broker non-votes.



                                       19
<PAGE>

Item 5.           Other Information


                  not applicable


Item 6.           Exhibits and Reports on Form 8-K

                  a).      Exhibits

                  3.1      Certificate of Incorporation of the Company, filed as
                           Exhibit 3(a)(2) to the Company's Post Effective
                           Amendment No. 1 to Form S-18 (File No. 33-33594-FW)
                           and incorporated by reference herein.

                  3.2      Certificate of Amendment of Certificate of
                           Incorporation of the Company, dated March 24, 1992
                           and filed as Exhibit 4.2 to the Company's Form S-8
                           (File No. 333-44337) and incorporated by reference
                           herein.

                  3.3      Amended and Restated Bylaws of the Company, filed as
                           Exhibit 3(b)(2) to the Company's Post Effective
                           Amendment No. 1 to Form S-8 (File No. 33-33594-FW)
                           and incorporated by reference herein.

                  4.1      Specimen Common Stock Certificate, filed as Exhibit
                           4.4 to the Company's Registration Statement on Form
                           S-3 (File No. 333-70823) and incorporated by
                           reference herein.

                  4.2      Rights Agreement, dated as of June 23, 1999, between
                           Craftmade International, Inc. and Harris Trust and
                           Savings Bank, as Rights Agent, previously filed as an
                           exhibit to Form 8-K dated July 9, 1999 (File No.
                           000-26667) and incorporated by reference herein.

                  10.1     Earnest Money contract and Design/Build Agreement
                           dated May 8, 1995, between MEPC Quorum Properties II,
                           Inc. and Craftmade International, Inc. (including
                           exhibits), previously filed as an exhibit in Form
                           10-Q for the quarter ended December 31, 1995, and
                           herein incorporated by reference.

                  10.2     Assignment of Rents and Leases dated December 21,
                           1995, between Craftmade International, Inc. and
                           Allianz Life Insurance Company of North America
                           (including exhibits), previously filed as an exhibit
                           in Form 10-Q for the quarter ended December 31, 1995,
                           and herein incorporated by reference.



                                       20
<PAGE>

                  10.3     Deed of Trust, Mortgage and Security Agreement made
                           by Craftmade International, Inc., dated December 21,
                           1995, to Patrick M. Arnold, as trustee for the
                           benefit of Allianz Life Insurance Company of North
                           America (including exhibits), previously filed as an
                           exhibit in Form 10-Q for the quarter ended December
                           31, 1995, and herein incorporated by reference.

                  10.4     Second Amended and Restated Credit Agreement dated
                           November 14, 1995, among Craftmade International,
                           Inc., Nations Bank of Texas, N.A., as Agent and the
                           Lenders defined therein (including exhibits),
                           previously filed as an exhibit in Form 10-Q for the
                           quarter ended December 31, 1995, and herein
                           incorporated by reference.

                  10.5     Lease Agreement dated November 30, 1995, between
                           Craftmade International, Inc. and TSI Prime, Inc.,
                           previously filed as an exhibit in Form 10-Q for the
                           quarter ended December 31, 1995, and herein
                           incorporated by reference.

                  10.6     Revolving credit facility with Texas Commerce Bank,
                           previously filed as an exhibit in Form 10-K for the
                           year ended June 30, 1996, and herein incorporated by
                           reference.

                  10.7     Agreement and Plan of Merger, dated as of July 1,
                           1998, by and among Craftmade International, Inc.,
                           Trade Source International, Inc., a Delaware
                           corporation, Neall and Leslie Humphrey, John DeBlois,
                           the Wiley Family Trust, James Bezzerides, the Bezzco
                           Inc. Employee Retirement Trust and Trade Source
                           International, Inc., a California corporation, filed
                           as Exhibit 2.1 to the Company's Current Report on
                           Form 8-K filed July 15, 1998 (File No. 33-33594-FW)
                           and herein incorporated by reference.

                  10.8     Voting Agreement, dated July 1, 1998, by and among
                           James R. Ridings, Neall Humphrey and John DeBlois,
                           filed as Exhibit 2.1 to the Company's Current Report
                           on Form 8-K filed July 15, 1998 (File No.
                           33-33594-FW) and herein incorporated by reference.

                  10.9     Third Amendment to Credit Agreement, dated July 1,
                           1998, by and among Craftmade International, Inc., a
                           Delaware corporation,



                                       21
<PAGE>
                           Trade Source International, Inc., a Delaware
                           corporation, Chase Bank of Texas, National
                           Association (formerly named Texas Commerce Bank,
                           National Association) and Frost National Bank
                           (formerly named Overton Bank and Trust), filed as
                           Exhibit 2.1 to the Company's Current Report on Form
                           8-K filed July 15, 1998 (File No. 33-33594-FW) and
                           herein incorporated by reference.

                  10.10    Consent to Merger by Chase Bank of Texas, National
                           Association and Frost National Bank, filed as Exhibit
                           2.1 to the Company's Current Report on Form 8-K filed
                           July 15, 1998 (File No. 33-33594-FW) and herein
                           incorporated by reference.

                  10.11    Employment Agreement, dated July 1, 1998, by and
                           among Craftmade International, Inc., Trade Source
                           International, Inc., a Delaware corporation and Neall
                           Humphrey, filed as Exhibit 2.1 to the Company's
                           Current Report on Form 8-K filed July 15, 1998 (File
                           No. 33-33594-FW) and herein incorporated by
                           reference.

                  10.12    Employment Agreement, dated July 1, 1998, by and
                           among Craftmade International, Inc., Trade Source
                           International, Inc., a Delaware corporation, and
                           Leslie Humphrey, filed as Exhibit 2.1 to the
                           Company's Current Report on Form 8-K filed July 15,
                           1998 (File No. 33-33594-FW) and herein incorporated
                           by reference.

                  10.13    Employment Agreement, dated July 1, 1998, by and
                           among Craftmade International, Inc., Trade Source
                           International, Inc., a Delaware corporation and John
                           DeBlois, filed as Exhibit 2.1 to the Company's
                           Current Report on Form 8-K filed July 15, 1998 (File
                           No. 33-33594-FW) and herein incorporated by
                           reference.

                  10.14    Registration Rights Agreement, dated July 1, 1998, by
                           and among Craftmade International, Inc., Neall and
                           Leslie Humphrey and John DeBlois, filed as Exhibit
                           2.1 to the Company's Current Report on Form 8-K filed
                           July 15, 1998 (File No. 33-33594-FW) and herein
                           incorporated by reference.

                  10.15    ISDA Master Agreement and Schedule, dated June 17,
                           1999, by and among Chase Bank of Texas, National
                           Association, Craftmade



                                       22
<PAGE>

                           International, Inc., Durocraft International, Inc.
                           and Trade Source International, Inc., filed as
                           Exhibit 10.15 to the Company's Quarterly Report on
                           Form 10Q filed November 12, 1999 (File No. 000-26667)
                           and herein incorporated by reference.

                  10.16    Confirmation under ISDA Master Agreement, dated July
                           23, 1999, from Chase Bank of Texas, National
                           Association to Craftmade International, Inc., filed
                           as Exhibit 10.16 to the Company's Quarterly Report on
                           Form 10Q filed November 12, 1999 (File No. 000-26667)
                           and herein incorporated by reference.

                  10.17    Fourth Amendment to Credit Agreement, dated April 2,
                           1999, by and among Craftmade International, Inc., a
                           Delaware corporation, Durocraft International, Inc.,
                           a Texas Corporation, Trade Source International,
                           Inc., a Delaware Corporation, Chase Bank of Texas,
                           National Association and Frost National Bank, filed
                           as Exhibit 10.17 to the Company's Quarterly Report on
                           Form 10-Q filed May 15, 2000 (File No. 000-26667) and
                           herein incorporated by reference.

                  10.18    Letter Agreement Concerning Fifth Amendment to Credit
                           Agreement, dated August 11, 1999, from Chase Bank of
                           Texas, N.A. and Frost National Bank to Craftmade
                           International, Inc., Durocraft International, Inc.,
                           Trade Source International, Inc., and C/D/R
                           Incorporated, filed as Exhibit 10.18 to the Company's
                           Quarterly Report on Form 10Q filed May 15, 2000 (File
                           No. 000-26667) and herein incorporated by reference.

                  10.19    Sixth Amendment to Credit Agreement, dated November
                           12, 1999, by and among Craftmade International, Inc.,
                           a Delaware corporation. Durocraft International,
                           Inc., a Texas Corporation, Trade Source
                           International, Inc., a Delaware Corporation, C/D/R
                           Incorporated, a Delaware corporation, Chase Bank of
                           Texas, National Association and Frost National Bank,
                           filed as Exhibit 10.19 to the Company's Quarterly
                           Report on Form 10Q filed May 15, 2000 (File No.
                           000-26667) and herein incorporated by reference.

                  10.20    Employment Agreement dated October 25, 1999, between
                           Kathy Oher and Craftmade International, Inc., filed
                           as Exhibit 10.20 to the Company's Annual Report on
                           Form 10-K



                                       23
<PAGE>

                           filed September 26, 2000 (File No. 000-26667) and
                           herein incorporated by reference.

                  10.21    Seventh Amendment to Credit Agreement dated May 12,
                           2000, by and among Craftmade International, Inc., a
                           Delaware corporation, Durocraft International, Inc.,
                           a Texas corporation, Trade Source International,
                           Inc., a Delaware corporation, C/D/R Incorporated, a
                           Delaware corporation, Chase Bank of Texas, National
                           Association and Frost National Bank, filed as Exhibit
                           10.21 to the Company's Annual Report on Form 10-K
                           filed September 26, 2000 (File No. 000-26667) and
                           herein incorporated by reference.

                  10.22    Craftmade International, Inc. 1999 Stock Option Plan,
                           filed as Exhibit A to the Company's Proxy Statement
                           on Schedule 14A filed October 4, 2000 (File No.
                           000-26667) and herein incorporated by reference.

                  10.23    Craftmade International, Inc. 2000 Non-Employee
                           Director Stock Plan, filed as Exhibit B to the
                           Company's Proxy Statement on Schedule 14A filed
                           October 4, 2000 (File No. 000-26667) and herein
                           incorporated by reference.

                  10.24    Eighth Amendment to Credit Agreement dated February
                           12, 2001, by and among Craftmade International, Inc.,
                           a Delaware corporation, Durocraft International,
                           Inc., a Texas corporation, Trade Source
                           International, Inc., a Delaware corporation, Design
                           Trends, LLC, a Delaware limited liability company,
                           C/D/R Incorporated, a Delaware corporation, The Chase
                           Manhattan Bank and The Frost National Bank, filed as
                           Exhibit 10.24 to the Company's Quarterly Report on
                           Form 10-Q filed May 14, 2001 (File No. 000-26667) and
                           herein incorporated by reference.

                  10.25    Ninth Amendment to Credit Agreement dated June 29,
                           2001, by and among Craftmade International, Inc. a
                           Delaware corporation, Durocraft International, Inc.,
                           a Texas corporation, Trade Source International,
                           Inc., a Delaware corporation, Design Trends, LLC, a
                           Delaware limited liability company, C/D/R
                           Incorporated, a Delaware corporation, The Chase
                           Manhattan Bank and The Frost National Bank, filed as
                           Exhibit 10.25 to the Company's Annual Report on Form
                           10-K filed



                                       24
<PAGE>

                           September 26, 2001 (File No. 000-26667) and herein
                           incorporated by reference.

                  10.26    Loan Agreement dated November 6, 2001, by and between
                           Craftmade International, Inc., a Delaware
                           corporation, and The Frost National Bank, a national
                           banking association.

                  10.27    Termination Agreement dated November 16, 2001, by and
                           between Craftmade International, Inc., a Delaware
                           corporation, and JPMorgan Chase Bank.


         b).      Reports on Form 8-K

                  None



                                       25
<PAGE>

                                    SIGNATURE

         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 thereunto duly authorized.

                                       CRAFTMADE INTERNATIONAL, INC.
                                               (Registrant)



Date February 13, 2002                 /s/ James R. Ridings
    -------------------------          ------------------------------
                                              JAMES R. RIDINGS
                                             President and Chief
                                              Executive Officer


Date February 13, 2002                 /s/ Kathleen B. Oher
    -------------------------          ------------------------------
                                              KATHLEEN B. OHER
                                           Chief Financial Officer



                                       26
<PAGE>

                                Index to Exhibits

<Table>
<Caption>
Exhibit
Number                             Description
-------                            -----------
<S>               <C>
3.1               Certificate of Incorporation of the Company, filed as Exhibit
                  3(a)(2) to the Company's Post Effective Amendment No. 1 to
                  Form S-18 (File No. 33-33594-FW) and incorporated by reference
                  herein.

3.2               Certificate of Amendment of Certificate of Incorporation of
                  the Company, dated March 24, 1992 and filed as Exhibit 4.2 to
                  the Company's Form S-8 (File No. 333-44337) and incorporated
                  by reference herein.

3.3               Amended and Restated Bylaws of the Company, filed as Exhibit
                  3(b)(2) to the Company's Post Effective Amendment No. 1 to
                  Form S-18 (File No. 33-33594-FW) and incorporated by reference
                  herein.

4.1               Specimen Common Stock Certificate, filed as Exhibit 4.4 to the
                  Company's Registration Statement on Form S-3 (File No.
                  333-70823) and incorporated by reference herein.

4.2               Rights Agreement, dated as of June 23, 1999, between Craftmade
                  International, Inc. and Harris Trust and Savings Bank, as
                  Rights Agent, previously filed as an exhibit to Form 8-K dated
                  July 9, 1999 (File No. 000-26667) and incorporated by
                  reference herein.

10.1              Earnest Money contract and Design/Build Agreement dated May 8,
                  1995, between MEPC Quorum Properties II, Inc. and Craftmade
                  International, Inc. (including exhibits), previously filed as
                  an exhibit in Form 10-Q for the quarter ended December 31,
                  1995, and herein incorporated by reference.

10.2              Assignment of Rents and Leases dated December 21, 1995,
                  between Craftmade International, Inc. and Allianz Life
                  Insurance Company of North America (including exhibits),
                  previously filed as an exhibit in Form 10-Q for the quarter
                  ended December 31, 1995, and herein incorporated by reference.

10.3              Deed of Trust, Mortgage and Security Agreement made by
                  Craftmade International, Inc., dated December 21, 1995, to
                  Patrick M. Arnold, as trustee for the benefit of Allianz Life
                  Insurance Company of North America (including exhibits),
                  previously filed as an exhibit in
</Table>



<PAGE>

<Table>
<S>               <C>
                  Form 10-Q for the quarter ended December 31, 1995, and herein
                  incorporated by reference.

10.4              Second Amended and Restated Credit Agreement dated November
                  14, 1995, among Craftmade International, Inc., Nations Bank of
                  Texas, N.A., as Agent and the Lenders defined therein
                  (including exhibits), previously filed as an exhibit in Form
                  10-Q for the quarter ended December 31, 1995, and herein
                  incorporated by reference.

10.5              Lease Agreement dated November 30, 1995, between Craftmade
                  International, Inc. and TSI Prime, Inc., previously filed as
                  an exhibit in Form 10-Q for the quarter ended December 31,
                  1995, and herein incorporated by reference.

10.6              Revolving credit facility with Texas Commerce Bank, previously
                  filed as an exhibit in Form 10-K for the year ended June 30,
                  1996, and herein incorporated by reference.

10.7              Agreement and Plan of Merger, dated as of July 1, 1998, by and
                  among Craftmade International, Inc., Trade Source
                  International, Inc., a Delaware corporation, Neall and Leslie
                  Humphrey, John DeBlois, the Wiley Family Trust, James
                  Bezzerides, the Bezzco Inc. Employee Retirement Trust and
                  Trade Source International, Inc., a California corporation,
                  filed as Exhibit 2.1 to the Company's Current Report on Form
                  8-K filed July 15, 1998 (File No. 33-33594-FW) and herein
                  incorporated by reference.

10.8              Voting Agreement, dated July 1, 1998, by and among James R.
                  Ridings, Neall Humphrey and John DeBlois, filed as Exhibit 2.1
                  to the Company's Current Report on Form 8-K filed July 15,
                  1998 (File No. 33-33594-FW) and herein incorporated by
                  reference.

10.9              Third Amendment to Credit Agreement, dated July 1, 1998, by
                  and among Craftmade International, Inc., a Delaware
                  corporation, Trade Source International, Inc., a Delaware
                  corporation, Chase Bank of Texas, National Association
                  (formerly named Texas Commerce Bank, National Association) and
                  Frost National Bank (formerly named Overton Bank and Trust),
                  filed as Exhibit 2.1 to the Company's Current Report on Form
                  8-K filed July 15, 1998 (File No. 33-33594-FW) and herein
                  incorporated by reference.
</Table>



<PAGE>

<Table>
<S>               <C>
10.10             Consent to Merger by Chase Bank of Texas, National Association
                  and Frost National Bank, filed as Exhibit 2.1 to the Company's
                  Current Report on Form 8-K filed July 15, 1998 (File No.
                  33-33594-FW) and herein incorporated by reference.

10.11             Employment Agreement, dated July 1, 1998, by and among
                  Craftmade International, Inc., Trade Source International,
                  Inc., a Delaware corporation and Neall Humphrey, filed as
                  Exhibit 2.1 to the Company's Current Report on Form 8-K filed
                  July 15, 1998 (File No. 33-33594-FW) and herein incorporated
                  by reference.

10.12             Employment Agreement, dated July 1, 1998, by and among
                  Craftmade International, Inc., Trade Source International,
                  Inc., a Delaware corporation and Leslie Humphrey, filed as
                  Exhibit 2.1 to the Company's Current Report on Form 8-K filed
                  July 15, 1998 (File No. 33-33594-FW) and herein incorporated
                  by reference.

10.13             Employment Agreement, dated July 1, 1998, by and among
                  Craftmade International, Inc., Trade Source International,
                  Inc., a Delaware corporation and John DeBlois, filed as
                  Exhibit 2.1 to the Company's Current Report on Form 8-K filed
                  July 15, 1998 (File No. 33-33594-FW) and herein incorporated
                  by reference.

10.14             Registration Rights Agreement, dated July 1, 1998, by and
                  among Craftmade International, Inc., Neall and Leslie Humphrey
                  and John DeBlois, filed as Exhibit 2.1 to the Company's
                  Current Report on Form 8-K filed July 15, 1998 (File No.
                  33-33594-FW) and herein incorporated by reference.

10.15             ISDA Master Agreement and Schedule, dated June 17, 1999, by
                  and among Chase Bank of Texas, National Association, Craftmade
                  International, Inc., Durocraft International, Inc. and Trade
                  Source International, Inc., filed as Exhibit 10.15 to the
                  Company's Quarterly Report on Form 10Q filed November 12, 1999
                  (File No. 000-26667) and herein incorporated by reference.

10.16             Confirmation under ISDA Master Agreement, dated July 23, 1999,
                  from Chase Bank of Texas, National Association to Craftmade
                  International, Inc., filed as Exhibit 10.16 to the Company's
                  Quarterly Report on Form 10Q filed November 12, 1999 (File No.
                  000-26667) and herein incorporated by reference.
</Table>



<PAGE>

<Table>
<S>               <C>
10.17             Fourth Amendment to Credit Agreement, dated April 2, 1999, by
                  and among Craftmade International, Inc., a Delaware
                  corporation, Durocraft International, Inc. a Texas
                  corporation, Trade Source International, a Delaware
                  corporation, Chase Bank of Texas, National Association and
                  Frost National Bank, filed as Exhibit 10.17 to the Company's
                  Quarterly Report on Form 10-Q filed May 15, 2000 (File No.
                  000-26667) and herein incorporated by reference.

10.18             Letter Agreement Concerning Fifth Amendment to Credit
                  Agreement, dated August 11, 1999, from Chase Bank of Texas,
                  N.A. and Frost National Bank to Craftmade International, Inc.,
                  Durocraft International Inc., Trade Source International,
                  Inc., and C/D/R Incorporated, filed as Exhibit 10.18 to the
                  Company's Quarterly Report on Form 10-Q filed May 15, 2000
                  (File No. 000-26667) and herein incorporated by reference.

10.19             Sixth Amendment to Credit Agreement, dated November 12, 1999,
                  by and among Craftmade International, Inc., a Delaware
                  corporation, Durocraft International, Inc., a Texas
                  corporation, Trade Source International, Inc., a Delaware
                  corporation, C/D/R Incorporated, a Delaware corporation, Chase
                  Bank of Texas, National Association and Frost National Bank,
                  filed as Exhibit 10.19 to the Company's Quarterly Report on
                  Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein
                  incorporated by reference.

10.20             Employment Agreement dated October 25, 1999, between Kathy
                  Oher and Craftmade International, Inc., filed as Exhibit 10.20
                  to the Company's Annual Report on Form 10-K filed September
                  26, 2000 (File No. 000-26667) and herein incorporated by
                  reference.

10.21             Seventh Amendment to Credit Agreement dated May 12, 2000, by
                  and among Craftmade International, Inc., a Delaware
                  corporation, Durocraft International, Inc., a Texas
                  corporation, Trade Source International, Inc., a Delaware
                  corporation, C/D/R Incorporated, a Delaware corporation, Chase
                  Bank of Texas, National Association and Frost National Bank,
                  filed as Exhibit 10.21 to the Company's Annual Report on Form
                  10-K filed September 26, 2000 (File No. 000-26667) and herein
                  incorporated by reference.
</Table>



<PAGE>

<Table>
<S>               <C>
10.22             Craftmade International Inc. 1999 Stock Option Plan, filed as
                  Exhibit A to the Company's Proxy Statement on Schedule 14A
                  filed October 4, 2000 (File No. 000-26667) and herein
                  incorporated by reference.

10.23             Craftmade International Inc. 2000 Non-Employee Director Stock
                  Plan, filed as Exhibit B to the Company's Proxy Statement on
                  Schedule 14A filed October 4, 2000 (File No. 000-26667) and
                  herein incorporated by reference.

10.24             Eighth Amendment to Credit Agreement dated February 12, 2001,
                  by and among Craftmade International, Inc., a Delaware
                  corporation, Durocraft International, Inc., a Texas
                  corporation, Trade Source International, Inc., a Delaware
                  corporation, Design Trends, LLC, a Delaware limited liability
                  company, C/D/R Incorporated, a Delaware corporation, The Chase
                  Manhattan Bank and The Frost National Bank, filed as Exhibit
                  10.24 to the Company's Quarterly Report on Form 10-Q filed May
                  14, 2001 (File No. 000-26667) and herein incorporated by
                  reference.

10.25             Ninth Amendment to Credit Agreement dated June 29, 2001, by
                  and among Craftmade International, Inc. a Delaware
                  corporation, Durocraft International, Inc., a Texas
                  corporation, Trade Source International, Inc., a Delaware
                  corporation, Design Trends, LLC, a Delaware limited liability
                  company, C/D/R Incorporated, a Delaware corporation, The Chase
                  Manhattan Bank and The Frost National Bank, filed as Exhibit
                  10.25 to the Company's Annual Report on Form 10-K filed
                  September 26, 2001 (File No. 000-26667) and herein
                  incorporated by reference.

10.26             Loan Agreement dated November 6, 2001, by and between
                  Craftmade International, Inc., a Delaware corporation, and The
                  Frost National Bank, a national banking association.

10.27             Termination Agreement dated November 16, 2001, by and between
                  Craftmade International, Inc., a Delaware corporation, and
                  JPMorgan Chase Bank.
</Table>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>3
<FILENAME>d94098ex10-26.txt
<DESCRIPTION>LOAN AGREEMENT DATED NOVEMBER 6, 2001
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.26


[FROST NATIONAL BANK LOGO]


                                 LOAN AGREEMENT



                                     BETWEEN

CRAFTMADE INTERNATIONAL, INC.                    THE FROST NATIONAL BANK
650 S. Royal Lane                      and       100 W. Houston Street
Coppell, Texas 75019                             San Antonio, Texas 78205


                                November 6, 2001


     THIS 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"):

         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) 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 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 Borrowing Base, 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.

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



<PAGE>

         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 any time, 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, (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 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 25.0% of the aggregate of all
         accounts otherwise deemed eligible hereunder which are owing by all
         account debtors, 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



                                       2
<PAGE>

         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 Options. 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:

                           (i) The lesser of (x) a rate equal to the Prime Rate
                  (defined below), minus one half percent (0.5%) per annum, with
                  said rate to be adjusted to reflect any change in said Prime
                  Rate at the time of any such change, or (y) the highest rate
                  permitted by applicable law, but in no event shall interest
                  contracted for, charged or received hereunder plus any other
                  charges in connection herewith which constitute interest
                  exceed the maximum interest permitted by applicable law, said
                  rate to be effective prior to maturity (however such maturity
                  is brought about) ("Prime Rate Option"). The "Prime Rate"
                  shall mean the prime rate of interest quoted in the Wall
                  Street Journal (Southwest Edition) in the "Money Rates" column
                  from time to time. The Prime Rate is a reference rate and does
                  not necessarily represent the lowest or best rate actually
                  charged to any customer.

                           (ii) 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:

<Table>
<Caption>
                          Percentage                 Debt to Worth Ratio
                          ----------                 -------------------
<S>                                                  <C>
                             2.25%                        >2.5 to 1.0
                             1.75%                   = to or <2.5 to 1.0
                             1.50%                   = to or <2.0 to 1.0
</Table>

                  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 Option").

                  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



                                       3
<PAGE>

                  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 period of time
                  equal or comparable to the interest period selected by
                  Borrower during which the rate will be applicable, which shall
                  be either one (1) month, two (2) months or three (3) months as
                  selected by Borrower ("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
                  (Southwest 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 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) Request for Advances; Rollover Periods. Each request for
         an Advance shall be made to Lender in writing, specifying the amount of
         the requested Advance, the Interest Rate Option and, if applicable, the
         Interest Period as permitted under this Section. A request for an
         Advance must be delivered to the Lender at least two (2) business days
         prior to the Advance being made if it is for a Libor Rate Option. Any
         Advances with a Libor Rate Option must be for a minimum of $100,000.00.
         Any request for an Advance received after 11:00 a.m. Fort Worth time
         shall be considered received by the Lender on the following business
         day. As to any outstanding Advances, Borrower shall notify Lender of
         the Interest Rate Option and length of the Interest Period to be
         applied to the upcoming Interest Period at least two (2) business days
         prior to the end of the Interest Period then in effect for a Libor Rate
         Option. If Borrower fails to notify the Lender of its election prior to
         the end of an Interest Period for any Advance, Borrower will be deemed
         to have elected the Prime Rate Option. Any request for an Advance shall
         be irrevocable by Borrower, and Borrower shall indemnify Lender against
         any cost, loss or expense incurred by Lender as a result of Borrower
         failing to fulfill the conditions for borrowing, including the cost of
         liquidating and re-employment of deposits or other funds to make the
         Advance. The specific interest rate available on any request by
         Borrower shall be the one quoted by Lender two (2) business days prior
         to the date the rate will go into effect for the Libor Rate Option. As
         used in this Loan Agreement, a "business day" shall mean a day on which
         business is transacted by national banks in Fort Worth, Texas.

                  (d) 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 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



                                       4
<PAGE>

         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. As a condition precedent to the Lender's obligation to
make the Loans to Borrower, Borrower agrees to cause Trade Source International,
Inc., Durocraft International, Inc., Design Trends, LLC and C/D/R/ Incorporated
(whether one or more, the "Guarantors") to each execute and deliver to Lender
contemporaneously herewith a guaranty agreement, in form and substance
satisfactory to Lender.

         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:



                                       5
<PAGE>

                  (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 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



                                       6
<PAGE>

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, 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.



                                       7
<PAGE>

                  (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 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.



                                       8
<PAGE>

                  (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.

                  (i) Dividends. Borrower agrees not to declare or pay any
         dividends on any shares of Borrower's capital stock in excess of
         $1,750,000 per annum in the aggregate; however, if Borrower issues new
         shares of capital stock then dividends will not exceed $.28 per share
         per annum. Borrower further agrees not to make any other distributions
         with respect to any payment on account of the purchase, redemption, or
         other acquisition or retirement of any shares of Borrower's capital
         stock, or make any other distribution, sale, transfer or lease of any
         of Borrower's assets other than in the ordinary course of business,
         unless any such amounts are directly utilized for the payment of
         principal or interest on indebtedness and obligations owing from time
         to time by Borrower to Lender.

         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 3.25 to 1.0 after June 30,
         2001, and 3.0 to 1.0 beginning September 30, 2001 and thereafter,
         tested quarterly.



                                       9
<PAGE>

                  (b) Interest Coverage Ratio. Borrower will maintain, as of the
         end of each month for the twelve most recently completed months, a
         ratio of (a) earnings before interest and taxes, plus depreciation and
         amortization for such month to (b) interest expense for such month, of
         not less than 1.90 to 1.0.

                  (c) 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, other non-cash expenses, interest
         expense and lease expense for the four (4) most recently completed
         quarters ending with such fiscal quarter, less any Distributions during
         such four (4) quarter period, to (b) interest expense, lease expense,
         current maturities of long-term debt and current maturities of
         long-term leases and capital expenditures for such four (4) quarter
         period, of not less than 0.9 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 thirty (30) days after the end of each month of each
         fiscal year of Borrower, a balance sheet and income statement of
         Borrower as of the end of such fiscal month 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 by independent public
         accountants of recognized standing acceptable to Lender.

                  (c) Compliance Certificate. A certificate signed by the Chief
         Financial Officer of Borrower within thirty (30) days after the end of
         each month of each fiscal year, 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



                                       10
<PAGE>

         thereof, and demonstrating compliance with all financial ratios and
         covenants set forth in this Loan Agreement.

                  (d) Borrowing Base Report. A borrowing base report 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.

                  (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 30 days after such filing.

                  (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.



                                       11
<PAGE>

                  (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 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



                                       12
<PAGE>

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.

         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



                                       13
<PAGE>

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

         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.



                                       14
<PAGE>

                         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.

     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., a                 THE FROST NATIONAL BANK,
Delaware corporation                             a national banking


By: /s/ James R. Ridings                         By: /s/ D. Michael Randall
    --------------------                             ----------------------
Name: James R. Ridings                           Name: D. Michael Randall
Title: President and CEO                         Title: Senior Vice President



                                       15

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>4
<FILENAME>d94098ex10-27.txt
<DESCRIPTION>TERMINATION AGREEMENT DATED NOVEMBER 16, 2001
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.27

                                [JPMORGAN LOGO]

                                                                16 November 2001


CRAFTMADE INTERNATIONAL INC
650 SOUTH ROYAL LANE
CAPELL, TEXAS 75019
CONTACT: JIM RIDING OR KEN CANCIENE
TEL: 972 393 3800
FAX: 972 304 3754

                              TERMINATION AGREEMENT

         TERMINATION AGREEMENT dated as of 14 November 2001 between JPMorgan
Chase Bank ("JPMorgan") and Craftmade International Inc ("Counterparty").

         JPMorgan and Counterparty are parties Master Agreement dated as of 17
June 1999 (the "Agreement") pursuant to which JPMorgan and Counterparty have
entered into the following Transaction(s) (the "Swap Transaction(s)"):

<Table>
<Caption>
Trade Date                 Termination Date          Notional Amount     ChaseRef.#
----------                 ----------------          ---------------     ----------
<S>                        <C>                       <C>                 <C>
23 July 1999               26 December 2003          USD 5,401,693.00    TEX1296 / 51369148
</Table>

JPMorgan and Counterparty desire to terminate their respective rights and
obligations under the Swap Transaction(s) upon the terms and conditions herein
contained. Accordingly the parties hereto agree as follows:

         1. Termination: Effective 14 November 2001 upon the payment of the
amount set forth in Section 2 on the specified dat, the rights, obligations and
liabilities of JPMorgan and of Counterparty under the Swap Transaction(s) are
hereby mutually terminated and discharged. Each party hereto acknowledges that,
except as provided herein, no payments or other amounts are owed to it by the
other party hereto under or with respect to the termination and discharge
affected hereby. Notwithstanding the foregoing, each party shall remain liable
for any payment or delivery due on or before 16 November 2001 by it under the
Swap Transaction(s). The termination and discharge provided for under this
Termination Agreement is limited to the Swap Transaction(s), and the Agreement
remains in full force and effect.

         2. Payment Obligation: In consideration of the termination and
discharge effected by the preceding section, on 16 November 2001, subject to
adjustment in accordance with the Following Business Day Convention JPMorgan
shall pay to Counterparty the sum of USD 61,500.00. (JPMorgan fee
reference #:5053224)



<PAGE>

         3. Representations: Each party hereby represents, with respect to
itself, that: (i) it has full corporate power and legal right to execute and
deliver, and to perform and observe the terms and provisions of this Termination
Agreement; (ii) the execution, delivery and performance of this Termination
Agreement have been duly authorized by all necessary action; (iii) this
Termination Agreement is a legally valid and binding obligation, enforceable
against it in accordance with its terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a proceeding
in equity or at law)), and (iv) all amounts due and payable by it on or before
the date hereof under the Swap Transaction(s) have been paid in full.

         4. Definitions: All terms used herein which are defined in the
Agreement shall have the meanings stated therein.

         5. Miscellaneous: This Termination Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
hereof. This Termination Agreement shall be governed by and construed in
accordance with the governing law as stated in the Agreement. This Termination
Agreement may be executed in counterparts, each of which shall be deemed an
original.

         IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first above written.



                                       JPMORGAN CHASE BANK


                                       By: /s/ Karen Puglia
                                           ----------------
                                       Name: Karen Puglia
                                       Title: Assistant Treasurer


CRAFTMADE INTERNATIONAL INC



By: /s/ James R. Ridings
    --------------------
Name: James R. Ridings
Title: Chief Executive Officer


</TEXT>
</DOCUMENT>
</SUBMISSION>
