<SUBMISSION>
<ACCESSION-NUMBER>0000950134-02-014313
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20020930
<FILING-DATE>20021114
<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>02823051
</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>d01310e10vq.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THES ECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002 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 [ ].

5,503,158 shares of Common Stock were outstanding as of October 31, 2002.



                                        1

<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 months ended September 30, 2002 and 2001.

                  Condensed Consolidated Balance Sheets as of
                  September 30, 2002 and June 30, 2002.

                  Condensed Consolidated Statements of Cash Flows for the three
                  months ended September 30, 2002 and 2001.

                  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.

         Item 4.  Controls and Procedures.

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
                                      -----------------------------
                                      September 30    September 30
                                         2002            2001
                                      -------------   -------------
                                   (In thousands except per share data)

<S>                                   <C>             <C>
Net Sales                             $      19,022   $      22,267
Cost of goods sold                           12,941          15,622
                                      -------------   -------------

Gross profit                                  6,081           6,645
                                      -------------   -------------

Selling, general and
      administrative expenses                 3,824           3,759
Interest expense, net                           195             313
Depreciation and amortization                   151             133
                                      -------------   -------------

          Total expenses                      4,170           4,205
                                      -------------   -------------

Income before equity in earnings
      of 50% owned investees and              1,911           2,440
      income taxes

Equity in earnings of
      investees before income taxes           1,554             606
                                      -------------   -------------

Income before income taxes                    3,465           3,046

Provision for income taxes                    1,261           1,089
                                      -------------   -------------


Net income                            $       2,204   $       1,957
                                      =============   =============

Basic earnings per common share       $        0.38   $        0.33
                                      =============   =============

Diluted earnings per common share     $        0.38   $        0.33
                                      =============   =============


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




                            SEE ACCOMPANYING NOTES TO
                        CONSOLIDATED FINANCIAL STATEMENTS


                                       3
<PAGE>


                 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS

<Table>
<Caption>

                                               September 30       June 30,
                                                  2002              2002
                                               -------------    -------------
                                               (Unaudited)

                                                     (In thousands)
<S>                                            <C>              <C>
Current assets:
    Cash                                       $       1,858    $         624
    Accounts receivable - net of
         allowance of $150,000 and $150,000,          11,564           15,077
         respectively
    Receivables from 50% owned investees                                2,227
    Inventory                                          8,367            8,570
    Deferred income taxes                                588              588
    Prepaid expenses and other
         current assets                                  451              453
                                               -------------    -------------

    Total current assets                              22,828           27,539


Property and equipment, net
    Land                                               1,535            1,535
    Building                                           7,784            7,784
    Office furniture and equipment                     3,742            3,694
    Leasehold improvements                               253              253
                                               -------------    -------------
                                                      13,314           13,266

Less:  accumulated depreciation                       (3,611)          (3,460)
                                               -------------    -------------

    Total property and equipment, net                  9,703            9,806

Goodwill, net of accumulated
    amortization of $1,204,000                         4,735            4,735
Deferred income tax                                      156              156
Investment in 50% owned investees                      3,485            2,244
Other assets                                              12               12
                                               -------------    -------------

    Total other assets                                 8,388            7,147
                                               -------------    -------------

Total assets                                   $      40,919    $      44,492
                                               =============    =============
</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>

                                                       September 30,       June 30,
                                                           2002            2002
                                                       -------------    -------------
                                                       (Unaudited)

                                                             (In thousands)
<S>                                                    <C>              <C>
Current liabilities:
    Note payable - current                             $         710    $         696
    Revolving lines of credit                                  6,150            9,034
    Accounts payable                                           4,625            3,067
    Commissions payable                                          254              274
    Payable to 50% owned investees                             1,176               --
    Income taxes payable                                       1,226              567
    Accrued liabilities                                        1,575            2,484
                                                       -------------    -------------
    Total current liabilities                                 15,716           16,122

Other non-current liabilities:
    Note payable - long term                                   5,563            5,746
                                                       -------------    -------------

    Total liabilities                                         21,279           21,868
                                                       -------------    -------------
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, 9,390,535 and
         9,390,535 shares issued, respectively                    94               94
Additional paid-in capital                                    13,261           13,261
Unearned deferred compensation                                   (68)             (76)
Retained earnings                                             32,167           30,380
                                                       -------------    -------------
                                                              45,486           43,691
    Less:  treasury stock, 3,783,877 and
         3,446,477 common shares at cost,
         and 32,000 preferred shares at cost                 (25,846)         (21,067)
                                                       -------------    -------------
         Total Stockholders' Equity                           19,640           22,624
                                                       -------------    -------------

Total liabilities and stockholders' equity             $      40,919    $      44,492
                                                       =============    =============
</Table>



                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS

                                       5
<PAGE>


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

<Table>
<Caption>

                                                         FOR THE THREE MONTHS ENDED
                                                       ------------------------------
                                                        September        September
                                                        30, 2002         31, 2001
                                                       -------------    -------------
                                                    (In thousands except per share data)
<S>                                                    <C>              <C>
Net cash provided by operating
activities:                                                    9,533    $       3,898
                                                       -------------    -------------

Cash flows from investing activities:
      Net additions to equipment                                 (49)            (130)
                                                       -------------    -------------
Net cash used for investing activities                           (49)            (130)
                                                       -------------    -------------

Cash flows from financing activities:
      Net proceeds from (payment to) lines of credit          (2,884)          (2,800)
      Principal payments on note payable                        (169)            (124)
      Treasury stock repurchases                              (4,779)              --
      Stock options exercised                                     --              108
      Cash dividends                                            (418)            (414)
                                                       -------------    -------------
Net cash used for financing activities                        (8,250)          (3,230)
                                                       -------------    -------------
Net increase in cash                                           1,234              538
Cash at beginning of period                                      624              723
                                                       -------------    -------------
Cash at end of period                                  $       1,858    $       1,261
                                                       =============    =============
</Table>



                       SEE ACCOMPANYING NOTES TO CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS

                                       6
<PAGE>

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

                               SEPTEMBER 30, 2002
                                   (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 wholly-owned subsidiaries; 50% owned
subsidiaries are accounted for using the equity method. 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, as amended, for the
fiscal year ended June 30, 2002. The financial data for the interim periods may
not necessarily be indicative of results to be expected for the year.

                                       7
<PAGE>

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

                               September 30, 2002
                                   (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
                                 -------------------------------
                                 September 30,     September 30,
                                     2002              2001
                                 -------------     -------------

                               (In thousands except per share data)
<S>                              <C>               <C>

Basic and Diluted EPS:
Numerator:  Net Income           $       2,204     $       1,957
                                 =============     =============


Basic Denominator: Common
      shares outstanding                 5,796             5,903
                                 =============     =============

Basic EPS                        $        0.38     $        0.33
                                 =============     =============



Diluted denominator:  Common
      shares outstanding                 5,796             5,903
Options                                     62                71
                                 -------------     -------------
Total Shares                             5,858             5,974
                                 =============     =============

Diluted EPS                      $        0.38     $        0.33
                                 =============     =============
</Table>


                                       8
<PAGE>

Note 3 - 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

September 30, 2002
Net sales from external customers     $     13,461     $      5,561      $     19,022
Operating profit                             2,329             (223)            2,106

For the three months ended

September 30, 2001
Net sales from external customers     $     13,427     $      8,840      $     22,267
Operating profit                             2,054              699             2,753
</Table>


                                       9
<PAGE>





Note 4 - INVESTMENT IN 50% OWNED INVESTEES

Combined summarized financial information for Design Trends and PHI is as
follows for the three months ended:

<Table>
<Caption>

                               September 30       September 30
                               -------------     -------------
                                  2002                2001
                               -------------     -------------
<S>                            <C>               <C>
Net sales                      $  11,155,000     $   9,801,000
Gross profit                       3,991,000         2,415,000
Income before income taxes         3,097,000         1,122,000


Accounts receivable - net      $   4,532,000         5,421,000
Inventories                        3,428,000         6,281,000
Total current assets               8,754,000        12,625,000
Total assets                      11,540,000        16,209,000
Revolving line of credit             255,000         1,678,000
Note payable - current               167,000                --
Total current liabilities          6,596,000        14,538,000
Total liabilities                  6,915,000        14,538,000
Total partner capital              4,625,000         1,671,000
</Table>

The Company received distributions of $308,000 and $200,000 for the three months
ended September 30, 2002 and 2001 respectively, from these two 50% owned
investees.

The Company's 50% owned investees operate in the form of partnerships and,
consequently, do not file federal income tax returns. Instead, the Company's
share of their income is reported in the Company's federal tax return.

Note 5 - TRANSACTIONS WITH 50% OWNED INVESTEES

There are no sales between the Company and its 50% investees or between the
investees. The investees utilize the Company's Coppell, Texas distribution
facility and Company personnel in the conduct of their operations.

The Company charges Design Trends for facility rent and payroll costs for those
full time Company employees when they work directly in Design Trends operations.
Facility rent is based on total square footage occupied by Design Trends and
payroll costs represent actual costs for those employees. No allocation of
indirect personnel costs, including management level personnel, is included in
the charge to Design Trends.


                                       10
<PAGE>

The Company utilizes borrowings under its line of credit to provide Design
Trends with advances for its working capital needs. The Company charges Design
Trends interest on these advances at the bank's prime rate plus two percentage
points and interest is calculated on the average outstanding monthly balance.

PHI reimburses the company $30,000 per month for general warehouse and
administrative expenses.

Craftmade's charges to its 50% owned investees are summarized as follows:

<Table>
<Caption>

                                   Three Months Ending
                             September 30       September 30
                             -------------     -------------
                                2002               2001
                             -------------     -------------
<S>                          <C>               <C>
Rent - Design Trends         $      60,000     $      60,000
Payroll - Design Trends      $     243,000     $     215,000
Interest - Design Trends     $      20,000     $     181,000
Administrative - PHI         $      90,000     $      90,000
</Table>


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 and vendor programs, whether
due to future national or regional economic and competitive conditions, changes
in relationships with customers, TSI's and PHI'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



                                       11
<PAGE>

which are difficult to predict and many of which are beyond the control of the
Company.

Results of Operations

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001.

Net Sales. Net sales for the Company decreased $3,245,000, or 14.6%, to
$19,022,000 for the three month period ended September 30, 2002 from $22,267,000
for the same three-month period last year. Net sales from the Craftmade division
increased $34,000, or .3%, to $13,461,000 for the three months ended September
30, 2002 from $13,427,000 for the same three-month period last year. Net sales
of the TSI division decreased $3,279,000, or 37.1%, to $5,561,000 for the three
months ended September 30, 2002 from $8,840,000 for the same three-month period
last year. The decrease was attributable to a decline in direct shipment sales
of outdoor lighting to a mass retail customer.

Gross Profit. Gross profit of the Company as a percentage of sales increased to
32.0% of net sales for the three months ended September 30, 2002, compared to
29.8% for the same period of 2001. The gross margin of the Craftmade division
increased to 40.4% of sales from 37.4% of sales in the year ago period. The
improvement in the gross margin of the Craftmade division was due primarily to
the improvement in the exchange rate of the U.S. dollar relative to the
Taiwanese dollar. The gross margin of the TSI division decreased to 11.6% of
sales for the three months ended September 30, 2002 compared to 18.4% of sales
in the year ago period. The decline in the gross margin of TSI was related to an
inventory write down of $380,000 taken during the quarter to record discontinued
items at their net realizable value.

Selling, General and Administrative Expenses. Total selling, general and
administrative ("SG&A") expenses of the Company increased $65,000 to $3,824,000,
or 20.1% of net sales, for the three months ended September 30, 2002, from
$3,759,000, or 16.9% of net sales, for the same three month period last year.
Total SG&A expenses of the Craftmade division increased $116,000 to $2,974,000,
or 22.1% of net sales, compared to $2,858,000, or 21.3% of net sales, for the
same period in the previous period. The increase in SG&A expenses of the
Craftmade division as a percentage of sales was primarily related to an increase
in payroll related expenses. Total SG&A expenses of the TSI division decreased
$51,000 to $850,000, or 15.3% of net sales,



                                       12
<PAGE>

compared to $901,000, or 10.2% of net sales, for the same period in the previous
year. The increase in TSI's SG&A expenses as a percentage of sales was related
to the decline in sales of the TSI division and the de-leveraging effect on
fixed SG&A costs.

Interest Expense. Net interest expense decreased $118,000 to $195,000 for the
three months ended September 30, 2002 from $313,000 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 line of credit, combined with
lower interest rates in effect during the period.

Equity in Earnings of 50% Owned Investees. Income from investees, representing
the Company's 50% ownership of Prime/Home Impressions, LLC ("PHI") and Design
Trends, LLC ("Design Trends") increased $948,000 to $1,554,000 from $606,000 for
the three months ended September 30, 2002 and 2001, respectively. The increase
in income from investees was due to an increase in sales of Design Trends'
portable lamp program which generated $1,267,000 in incremental revenue for
Design Trends during the period.

Provision For Income Taxes. The provision for income taxes increased to
$1,261,000 or 36.4% of net income before taxes but after minority interest
expense, for the three months ended September 30, 2002, from $1,089,000 or 35.8%
for the same period of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash increased $1,234,000 from $624,000 at June 30, 2002 to
$1,858,000 at September 30, 2002. The Company's operating activities provided
cash of $9,533,000, which was primarily attributable to the Company's net income
from operations, collection of customer receivables and collection of
receivables from investees.

The $49,000 of cash used for investing activities related primarily to additions
to property and equipment associated with the implementation of the Company's
logistics and accounting systems upgrade.

Cash used for financing activities of $8,250,000 was primarily the result of (i)
the repurchase of 337,000 shares of the Company's common stock at an aggregate
cost of $4,779,000, (ii)



                                       13
<PAGE>

principal payments of $169,000 on the Company's facility note payable, (iii)
principal payments or $2,884,000 on the Company's line of credit, and (iv) cash
dividends of $418,000.

At September 30, 2002, subject to continued compliance with certain covenants
and restrictions, the Company had $20,000,000 available on its lines of credit,
of which $6,150,000 had been utilized. The Company's management believes that
its current line of credit, combined with cash flows from operations, is
adequate to fund the Company's current operating needs, make annual payments of
approximately $1,200,000 under the Company's facility note payable, fund any
future dividend payments, as well as fund its projected growth over the next
twelve months.

At September 30, 2002, $6,273,000 remained outstanding under the 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. The facility note payable matures on January 1, 2008.

During the year ended June 30, 2002, the Company's Board of Directors authorized
the Company's management to repurchase up to 600,000 shares of the Company's
outstanding common stock. At June 30, 2002, the Company had repurchased 17,000
shares at an aggregate cost of $235,000. During the first quarter of fiscal
2003, the Company repurchased 337,400 shares at an aggregate cost of $4,779,000.
As of October 1, 2002, 245,600 shares remained available for repurchase under
this program.




                                       14
<PAGE>





With respect to the Company's 50%-owned investees, PHI had $3,000,000 available
on its line of credit, of which $741,000 had been utilized at September 30,
2002. Craftmade is a guarantor of this line of credit. Design Trends utilizes
the Company's $20,000,000 line of credit described above. To satisfy anticipated
demand for the portable lamp program, Design Trends maintained an inventory
level of $2,533,000 at September 30, 2002. This program is highly concentrated
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 Company would be able to obtain additional customers
for this inventory or that these alternative sources would generate similar
sales levels and profit margins as anticipated with the current mass
merchandiser customer.

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.

At September 30, 2002, 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 $6,150,000 was outstanding. At September 30, 2002 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.

At September 30, 2002, PHI had a $3,000,000 line of credit with Wachovia Bank,
N.A. at an interest rate equal to the one-month LIBOR plus 2%, of which $241,000
was outstanding. At September 30, 2002 the one-month LIBOR rate was equal to
1.82%. The PHI Line of Credit is due on demand; however, if no demand is made,
it is scheduled to mature April 16, 2003. In addition, PHI had a $500,000
three-year note payable with Wachovia maturing on July 29, 2005. The note bears
interest at a rate equal to the Monthly LIBOR Index plus 2.5%. These two lines
of credit of PHI are referred to as the "PHI Lines of Credit."



                                       15
<PAGE>

Because of the short-term nature of each of the Craftmade Line of Credit and the
PHI Lines 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 interest
expense would increase by approximately $62,000. 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
$310,000.

Under the PHI Lines of Credit, for each one-percentage point (1%) incremental
increase in LIBOR, the Company's annualized interest expense would increase by
approximately $7,000. Consequently, an increase in LIBOR of five percentage
points (5%) would result in an estimated annualized increase in interest expense
for the Company of approximately $35,000.

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 November 6, 2002, one U.S. dollar
equaled $34.68 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


                                       16
<PAGE>

believe that it is subject to any material foreign currency exchange risk with
respect to such purchases.

During the fiscal quarter ended September 30, 2002, the Company purchased
approximately $4,645,000 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 goods
sold of approximately $465,000, based on the Company's purchases during the
fiscal quarter ended September 30, 2002 (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 $2,325,000, based on
the Company's purchases during the fiscal quarter ended September 30, 2002 (on
an annualized basis). A $10 incremental appreciation of the Taiwanese dollar
would result in an increase of approximately $4,650,000 on an annualized basis,
based on the Company's purchases during the fiscal quarter ended September 30,
2002 (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 September 30, 2002. Consequently, these amounts are not
necessarily indicative of the effect of such changes with respect to an entire
year.

ITEM 4 CONTROLS AND PROCEDURES.

The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the chief executive officer and the chief financial officer of the
Company concluded that the Company's disclosure controls and procedures are
effective in ensuring that all material information required to be filed in this
quarterly report has been made known to them in a timely manner.

The Company made no significant changes in its internal controls or in other
factors that could significantly affect these



                                       17
<PAGE>

controls subsequent to the date of the evaluation of those controls by the chief
executive officer and chief financial officer.








                                       18
<PAGE>



                                     PART II

                                OTHER INFORMATION


Item 1.           Legal Proceedings

                  not applicable

Item 2.           Changes in Securities and Use of Proceeds

                  not applicable

Item 3.           Defaults Upon Senior Securities

                  not applicable

Item 4.           Submission of Matters to a Vote of Stockholders

                  not applicable

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.



                                       19
<PAGE>

                  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 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),



                                       20
<PAGE>

                           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



                                       21
<PAGE>

                           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    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



                                       22
<PAGE>

                           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.

                  10.15    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.

                  10.16    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.

                  10.17    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.

                  10.18    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



                                       23
<PAGE>

                           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.

                  10.19    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.

                  10.20    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.

                  10.21    Eight 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 Annual Report on Form
                           10-K filed May 14, 2001(File No. 000-26667) and
                           herein incorporated by reference.

                  10.22    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



                                       24
<PAGE>

                           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.

                  10.23    Loan Agreement dated November 6, 2001, by and between
                           Craftmade International, Inc., a Delaware
                           corporation, and The Frost National Bank, a national
                           banking association, filed as Exhibit 10.26 to the
                           Company's quarterly Report on Form 10-Q filed
                           February 14, 2002 (File No. 000-26667) and herein
                           incorporated by reference.

                  10.24    Termination Agreement dated November 16, 2001, by and
                           between Craftmade International, Inc., a Delaware
                           corporation, and JP Morgan Chase Bank, filed as
                           Exhibit 10.27 to the Company's Quarterly Report on
                           Form 10-Q filed February 14, 2002 (File No.
                           000-26667) and herein incorporated by reference.

                  10.25    Loan Agreement dated April 17, 2002, by and between
                           Prime/Home Impressions, LLC, a North Carolina limited
                           liability company, and Wachovia Bank, N.A., with Note
                           and Security Agreement of Prime/Home Impressions,
                           LLC, Guaranty Agreement of Craftmade International,
                           Inc., Guaranty Agreement of Trade Source
                           International, Inc., and Guaranty Agreement of Home
                           Impressions, Inc.

                  10.26    Note and Security Agreement dated April 29, 2002, by
                           Prime/Home Impressions LLC, a North Carolina limited
                           liability company, to Wachovia Bank, N.A., with
                           Security Agreement of Prime/Home Impressions, LLC,
                           Guaranty Agreement of Craftmade International, Inc.,
                           and Guaranty Agreement of Trade Source International,
                           Inc.

                  b).  Reports on Form 8-K



                                       25
<PAGE>

            On August 20, 2002, the Company filed a Form 8-K concerning the
issuance of a press release concerning its fiscal 2002 fourth quarter and
year-end results.

            On September 26, 2002, the Company filed a Form 8-K concerning
certifications of the Company's Chief Executive Officer and Chief Financial
Officer with respect to the filing of its Form 10-Q/As for the quarters ended
September 30, 2001, December 31, 2001, and March 31, 2002, respectively.

            On September 30, 2002, the Company filed a Form 8-K concerning
certifications of the Company's Chief Executive Officer and Chief Financial
Officer with respect to the filing of its Form 10-K/A for the fiscal year ended
June 30, 2001.

            On September 30, 2002, the Company filed a Form 8-K concerning
certifications of the Company's Chief Executive Officer and Chief Financial
Officer with respect to the filing of its Form 10-K for the fiscal year ended
June 30, 2002.



                                       26
<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 November 14, 2002                             /s/  James R. Ridings
     ------------------                    ------------------------------------
                                                     JAMES R. RIDINGS
                                                    President and Chief
                                                     Executive Officer


Date November 14, 2002                             /s/  Kathleen B. Oher
     ------------------                    ------------------------------------
                                                      KATHLEEN B. OHER
                                                  Chief Financial Officer



                                       27
<PAGE>



                                 CERTIFICATIONS
                             PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002


I, James R. Ridings, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Craftmade
         International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

                  c) presented in this quarterly report our conclusions about
                  the effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;



                                       28
<PAGE>

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Date:  November 14, 2002                        /s/ James R. Ridings
                                            -----------------------------------
                                                    James R. Ridings
                                                    President and
                                                    Chief Executive Officer




                                       29
<PAGE>




I, Kathleen B. Oher, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Craftmade
         International, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report; and

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report.

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

                  c) presented in this quarterly report our conclusions about
                  the effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the



                                       30
<PAGE>

         equivalent functions):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Date:  November 14, 2002                            /s/ Kathleen B. Oher
                                            ------------------------------------
                                                     Kathleen B. Oher
                                                   Chief Financial Officer



<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.
</Table>

<PAGE>

<Table>

<S>               <C>
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, Trade Source International, Inc., a

</Table>

<PAGE>

<Table>

<S>               <C>
                  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             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.
</Table>

<PAGE>

<Table>

<S>               <C>
10.15             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.

10.16             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.

10.17             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.

10.18             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.

10.19             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. .

10.20             Craftmade International Inc. 2000 Non-Employee Director Stock
                  Plan, filed as Exhibit B to the Company's Proxy Statement on
                  Schedule 14A filed
</Table>

<PAGE>

<Table>

<S>               <C>
                  October 4, 2000 (File No. 000-26667) and herein incorporated
                  by reference.

10.21             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.

10.22             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.

10.23             Loan Agreement dated November 6, 2001, by and between
                  Craftmade International, Inc., a Delaware corporation, and The
                  Frost National Bank, a national banking association, filed as
                  Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q
                  filed February 14, 2002 (File No. 000-26667) and herein
                  incorporated by reference.

10.24             Termination agreement dated November 16, 2001, by and between
                  Craftmade International, Inc., a Delaware corporation, and
                  JPMorgan Chase Bank, filed as Exhibit 10.27 to the Company's
                  Quarterly Report on Form 10-Q filed February 14, 2002 (File
                  No. 000-26667) and herein incorporated by reference.

10.25             Loan Agreement dated April 17, 2002, by and between Prime/Home
                  Impressions, LLC, a North Carolina limited liability company,
                  and Wachovia Bank, N.A., with Note and Security Agreement of
                  Prime/Home Impressions, LLC,
</Table>

<PAGE>

<Table>
<S>               <C>
                  Guaranty Agreement of Craftmade International, Inc., Guaranty
                  Agreement of Trade Source International, Inc., and Guaranty
                  Agreement of Home Impressions, Inc.

10.26             Note and Security Agreement dated April 29, 2002, by
                  Prime/Home Impressions LLC, a North Carolina limited liability
                  company, to Wachovia Bank, N.A., with Security Agreement of
                  Prime/Home Impressions, LLC, Guaranty Agreement of Craftmade
                  International, Inc., and Guaranty Agreement of Trade Source
                  International, Inc.
</Table>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>3
<FILENAME>d01310exv10w25.txt
<DESCRIPTION>LOAN AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.25


                       [LETTERHEAD OF WACHOVIA BANK, N.A.]





April 17, 2002


Mr. Robert W. Lackey, Sr., Group A Manager
Mr. Neall W. Humphrey, Group B Manager
Prime/Home Impressions, LLC
420 Third Ave. NW
Hickory, NC 28601

Gentlemen:

Wachovia Bank, N.A. (the "Bank") is pleased to extend to Prime/Home Impressions,
LLC (the "Borrower") a revolving line of credit of up to Three Million and
00/100 Dollars ($3,000,000.00) (the "Commitment").

PURPOSE:                   To finance short-term working capital

REPAYMENT TERMS:           Interest shall be paid monthly in arrears. All
                           principal and interest outstanding shall become due
                           and payable in full on the expiration date.

EXPIRATION:                The Commitment shall expire on April 16, 2003

INTEREST RATE:             The Note shall bear interest at a rate per annum
                           equal to the "Monthly LIBOR Index" for the applicable
                           Interest Period plus Two Percent (2.00%).

                           As used herein, the "Monthly LIBOR Index" for an
                           applicable Interest Period shall mean a rate per
                           annum equal to the quotient obtained by dividing the
                           applicable "LIBOR" for such Interest Period by 1.00
                           minus the "Eurodollar Reserve Percentage".

                           As used herein, the "LIBOR" shall mean for the
                           applicable Interest Period, the rate per annum at
                           which deposits of United States dollars with
                           maturities comparable to the applicable Interest
                           Period, that appears on the display designated as
                           page "3750" of the Telerate Service (or such other
                           page as may replace page 3750 of that service or such
                           other service or services as may be designated by the
                           British Bankers' Association for the purpose of
                           displaying London Interbank Offered Rates for U.S.
                           dollar deposits), determined as of 11:00 a.m. (London
                           time) (rounded upward to the next higher of 1/10,000
                           of 1%), two (2) business days prior to the
                           commencement of the applicable Interest Period.

                           As used herein, "Eurodollar Reserve Percentage" means
                           for any day that percentage (expressed as a decimal)
                           which is in effect on such day, as prescribed by the
                           Board of Governors of the Federal Reserve System (or
                           any successor) for determining the maximum reserve
                           requirement for a member bank of the Federal Reserve
                           System in respect of


<PAGE>

                           "Eurocurrency liabilities" (as adjusted automatically
                           on and as of the effective date of any change in the
                           Eurodollar Reserve Percentage).

                           As used herein, "Interest Period" shall mean each
                           successive calendar month, with the first Interest
                           Period being the period from the date of the Note
                           until the last day-of that calendar month.

FEES/COSTS:                Borrower agrees to pay to the Bank a fee of
                           one-quarter of one percent (1/4%) of the Commitment
                           amount upon acceptance of the Commitment.

COLLATERAL-                The aggregate amount outstanding under the Commitment
BORROWING BASE:            shall not exceed Paragraph the Margin. "Margin"
                           shall mean an amount equal to 85% of the face dollar
                           amount of Eligible Accounts Receivable (as
                           hereinafter defined) as of the date of determination,
                           plus 60% of the value of Eligible Inventory (as
                           hereinafter defined).

                           The Bank hereby agrees that in the event that the
                           Borrower is in noncompliance with the "Margin"
                           requirement, the Borrower shall have an opportunity
                           to correct such non-compliance by providing the
                           necessary funds to the Bank to satisfy the Margin
                           requirement within seven (7) days after the sooner to
                           occur of the following:

                           1.    Receipt of notice of such non-compliance from
                                 the Bank; or

                           2.    The due date of the borrowing base report in
                                 which such non-compliance is first reported.

                           This recitation of the right of the Borrower to
                           correct the non-compliance shall not constitute an
                           election by the Bank to waive its right to demand
                           payment at any time under any event as the Bank in
                           its sole discretion may deem appropriate.

                           "Eligible" accounts receivable are defined as the
                           accounts receivable of the Borrower that are less
                           than 90 days from the due date except for.

                           (1)   Inter-Company Accounts: Accounts receivable
                                 from companies that share common ownership with
                                 the Borrower, whether in whole or in part,
                                 excluding "pass-through" accounts receivable
                                 for which Home Impressions, Inc. serves as the
                                 collection agent on behalf of the Borrower.

                           (2)   Tainted Accounts: Accounts receivable of which
                                 more than 50% of the amount owed is more than
                                 90 days past due, thus making the entire
                                 account ineligible.

                           (3)   Questionable Accounts: Any other account
                                 determined by the Bank to be questionable.

                           "Eligible" inventory is defined as sellable raw
                           materials and finished goods that are in the
                           possession of the Borrower as of the date of
                           determination.

GUARANTORS:                As selected and offered by the Borrower, the Loan
                           shall be unconditionally guaranteed, on the Bank's
                           form, evidencing the joint and several liability of
                           the following companies:

                           Home Impressions, Inc.
                           Trade Source International, Inc.
                           Craftmade International, Inc.


<PAGE>

REQUIRED REPORTS:          Annual Compiled Financial Statements: The Borrower
(Borrower):                shall provide to the Bank compiled financial
                           statements for each fiscal year ending June 30. The
                           compilations shall be certified by an officer of the
                           company, and shall be delivered to the Bank no later
                           than 90 days from the end of the accounting period.

                           Quarterly Financial Statements: The Borrower shall
                           provide to the Bank a quarterly balance sheet and
                           income statement prepared internally and certified by
                           an officer of the company. These reports shall be
                           delivered to the Bank no later than-45 days from the
                           end of the accounting period.

                           Monthly Receivables Report: The Borrower shall
                           provide to the Bank a monthly aging report of
                           accounts receivable. The report shall be delivered to
                           the Bank no later than 15 days from the end of the
                           accounting period.

                           Monthly Inventory Report: The Borrower shall provide
                           to the Bank a monthly report of inventory in its
                           possession. The report shall be delivered to the Bank
                           no later than 15 days from the end of the accounting
                           period.

                           Monthly Borrowing Base Report: The Borrower shall
                           provide to the Bank a monthly borrowing base report
                           no later than 15 days from the end of the accounting
                           period.

REQUIRED REPORTS:          Home Impressions, Inc., identified for these purposes
(Guarantor #1):            as Guarantor #1, shall provide to the Bank a compiled
                           financial statement for each fiscal year ending May
                           31. The compilation shall be prepared internally and
                           shall be certified by an officer of the company. The
                           compilation shall be delivered to the Bank no later
                           than 90 days from the end of the accounting period.

REQUIRED REPORTS:          Craftmade International, Inc., identified for these
(Guarantor #2):            purposes as Guarantor #2, shall provide to the Bank
                           an audited financial statement for each fiscal year
                           ending June 30. The audit shall be prepared by an
                           independent accounting firm acceptable to the Bank,
                           and shall be delivered to the Bank no later than 90
                           days from the end of the accounting period.

                           Guarantor #2 shall also provide to the Bank a
                           quarterly balance sheet and income statement prepared
                           internally, and certified by an officer of the
                           company. The quarterly financial report shall detail
                           the balance sheet and income statement of the
                           Guarantor's subsidiaries including, but not limited
                           to, Trade Source International, Inc. The report shall
                           be delivered to the Bank no later than 45 days from
                           the end of the accounting period.

COVENANTS:                 Guarantor #2, as defined above, covenants and agrees
                           that from the date hereof and until payment in full
                           of the principal and interest on the loan, unless the
                           Bank shall otherwise consent in writing, Guarantor #2
                           shall:

                           1.    Maintain at all times a consolidated "Total
                                 Liabilities to Tangible Net Worth" ratio of no
                                 greater than 3.00 to 1.00. "Tangible Net Worth"
                                 is defined as the sum of all shareholder equity
                                 less -all intangibles appearing on the balance
                                 sheet. This covenant shall be measured by the
                                 Bank on a quarterly basis and shall be reported
                                 to the Bank by Guarantor #2 no later than 45
                                 days from the end of each quarterly accounting
                                 period.

                           2.    Maintain at all times a consolidated "Funded
                                 Debt to EBITDA" ratio of no greater than 2.75
                                 to 1.00. "Consolidated Funded Debt" is defined
                                 as the sum of the debt of the Company and its
                                 Subsidiaries, determined on a consolidated
                                 basis, consisting of (without duplication) the
                                 following: (i) indebtedness for borrowed money;
                                 (ii) Capital Leases, and (iii) Guarantees of
                                 debt of Persons other than the Company or any
                                 Subsidiary.


<PAGE>

                                 "Consolidated EBITDA" is defined as the sum of
                                 the following, calculated on a consolidated
                                 basis in accordance with GAAP for the Company
                                 and its Subsidiaries: (i) Consolidated Net
                                 Income, plus (ii) Consolidated Interest
                                 Expense, plus (iii) Depreciation and
                                 Amortization expense, plus (iv) expenses for
                                 taxes paid or accrued during such period. This
                                 covenant shall be measured by the Bank at the
                                 end of each quarter on a rolling four-quarter
                                 basis, and shall be reported to the Bank by
                                 Guarantor #2 no later than 45 days from the end
                                 of each quarterly accounting period.

OTHER CONDITIONS:          This commitment is subject to the maintenance by the
                           Borrower and the Guarantors of a condition
                           satisfactory to the Bank and the execution of loan
                           documents satisfactory to the Bank. (Examples of an
                           unsatisfactory condition include a change in
                           management or ownership, an adverse change in
                           financial condition, or any default on any obligation
                           to the Bank or to a third party.)

                           In no event shall either the Borrower, the
                           Guarantors, or the Bank be liable to the other for
                           indirect, special, or consequential damages that may
                           arise out of the issuance of this commitment.

                           Closing must occur by April 30, 2002

                           All information and representations are and will be
                           at closing accurate.

                           No condition or other term of this commitment may be
                           waived or modified except by a writing signed by the
                           Borrower, the Guarantors, and the Bank.


To acknowledge your acceptance, please sign below and return this document to
the Bank. Thank you for this opportunity to serve your fine company.

Very truly yours,

/s/ Philip E. Moore

Philip E. Moore
Senior Vice President

Accepted this 18th day of April, 2002.


BORROWER

Prime/Home Impressions, LLC - A Manager Managed Limited Liability Company

<Table>
<S>                                                 <C>
By: /s/ Robert W. Lackey                            By:  /s/ Neall W. Humphrey
    ---------------------------------------             ---------------------------------------------
    Robert W. Lackey, Sr., Group Manager                 Neall W. Humphrey, Group B. Manager

MEMBERS

Home Impressions, Inc. Group A Member                Trade Source International, Inc., Group B Member


By:  /s/ Robert W. Lackey                            By:  /s/James R. Ridings
     ---------------------------------------             --------------------------------------------
       Robert W. Lackey, Sr., Vice President              James R. Ridings, President
</Table>



<PAGE>

GUARANTORS

Home Impressions, Inc.


By:  /s/Robert W. Lackey
     --------------------------------------
     Robert W. Lackey, Sr., Vice-President


Trade Source International, Inc.


By:  /s/James R. Ridings
     --------------------------------------
     James R. Ridings, President


Craftmade International Inc.


By:  /s/James R. Ridings
     --------------------------------------
     James R. Ridings, President


<PAGE>
 This Note and Security is a renewal of an existing Note and Security Agreement
                          between Borrower and Lender

NOTE AND SECURITY AGREEMENT

Hickory, North Carolina

Date:  April 17, 2002                                             $3,000,000.00

FOR VALUE RECEIVED, Prime/Home Impressions, LLC, limited liability company
organized and existing under the laws of the State of North Carolina and whose
chief executive office is located at 420 3rd Avenue NW, Hickory, North Carolina
28601 (hereinafter the "Borrower"), hereby promises to pay to the order of
Wachovia Bank, NA. (hereinafter the "Lender") at its office where borrowed, or
at such other place as Lender hereafter may direct from time to time in writing,
in immediately available funds of lawful money of the United States, the sum of
Three Million and 00/100 Dollars together with any unpaid interest hereon from
date of advance, in accordance with the terms contained in this Note and
Security Agreement (hereinafter referred to as the "Note"). The optional
provisions applicable to this Note are checked below.

REPAYMENT:

[ ]  One payment in full of principal and unpaid interest due _________________

[ ]  On demand __________________________

[ ]  ________ payments of $_________ beginning ____________________________ and
     thereafter __________________________ until ____________________________.

     When the entire principal amount then outstanding and all accrued but
     unpaid interest shall be paid in full.

[X]  On demand the principal amount set forth above or the unpaid principal
     amount of all advances which the Lender actually makes hereunder to the
     Borrower, whichever amount is less. The Borrower may borrow, repay and
     reborrow sums up to the principal amount set forth above. This Note shall
     be used to evidence the outstanding principal balance advanced hereunder
     until it is surrendered to the Borrower by the Lender, and it shall
     continue to be used even though there may be periods prior to such
     surrender when no amount of principal or interest is owing hereunder. If
     advances of the principal amount hereof are to be made by Lender to the
     Borrower after the date of this Note, Lender, at its sole discretion, is
     hereby authorized to make such advances under this. Note upon telephonic or
     written communication of a borrowing request from any Person representing
     himself or herself to be the Borrower or, in the event the Borrower is an
     organization, a duly authorized officer or representative of Borrower.

INTEREST:

Payable: [X] in arrears; [ ]  in advance
         [X] in addition to the payments described above;
         [ ] included in the payments described above.

Payable at the rate per annum of [ ] Prime Rate plus ____%;  [ ] __________% of
Prime Rate; [ ] ____________% Fixed;

   [ ]  Those rates which may be offered from time to time by the Lender and
        agreed to by the Borrower and so noted by the Lender on an attachment
        hereto. In the event of a good faith dispute among the parties to this
        Note as to rate under this rate option, the rate shall be the Prime
        Rate, adjusted for any changes in the Prime Rate as of the day such Rime
        Rate changes;

  [X]   The rate(s) set forth in Schedule 1 attached to this Note and
        incorporated herein by reference;

  [ ]   Those rates which have been offered by the Lender to the Borrower in the
        Loa a Agreement or Commitment Letter checked below, the provisions of
        which shall determine such rates, the procedure for the selection of
        such rates and the time periods for which such rates shall apply.

In no case shall interest exceed the maximum rate permitted by applicable law.

If the interest is based upon the Prime Rate, such interest rate will be
adjusted on: [ ] The day the Prime Rate changes   [ ] Other ________

Due: [ ] On principal payment dates [X] Other MONTHLY BEGINNING MAY 1, 2002
Interest will be calculated on the basis of [X] A year of 360 days and paid for
the actual number of days elapsed [ ] Other __________

After demand or maturity (whether by acceleration or otherwise), as applicable,
interest on any unpaid balance hereof shall be payable on demand at a rate per
annum-equal to the greater of 150 % of the Prime Rate, or 2 % above the rate
applicable prior to demand or maturity, adjusted for any changes in the Prime
Rate as of the day such Prime Rate changes, not to exceed the maximum rate
permitted by applicable law.

To the extent not prohibited by law, a late charge of four percent (4%) or the
applicable statutory maximum, whichever is greater, shall be assessed on any
payment remaining past due for fifteen (15) days or more unless interest on this
Note is payable in advance, in which case such period shall instead be thirty
(30) days or more; provided, however, that if any applicable statute allows, a
shorter minimum time period for the imposition of a late charge, such shorter
time period shall prevail.

As used herein, "Prime Rate" refers to that interest rate so denominated and set
by the Lender from time to time as an interest rate basis for borrowings. The
Prime Rate is one of several interest rate bases used by the Lender. The Lender
lends at interest rates above and below the Prime Rate.

All payments on this Note shall be applied, in accordance with the then current
billing statement applicable to this Note, first to accrued interest, then to
fees, then to principal due and then to late charges. Any remaining funds shall
be applied to the further reduction of principal. Notwithstanding the foregoing,
upon the occurrence of a default hereunder, payments shall be applied as
determined by Lender in its sole discretion.

[ ] The terms and conditions in a Loan Agreement dated ___________ between the
    parties hereto, as the same may be amended from time to time, shall be
    considered a part hereof to the same extent as if written herein.

[X] The terms and conditions in a Commitment Letter dated APRIL 17, 2002 from
    the Lender to the Borrower, as the same may be amended, extended or replaced
    from time to time, shall be considered a part hereof to the same extent as
    if written herein.

In addition to any other collateral specified herein and in other agreements, to
secure the indebtedness evidenced by this Note, together with any extensions,
modifications, or renewals thereof, in whole or in part, as well as all other
indebtedness, obligations and liabilities of the Borrower to the Lender, now
existing or hereafter incurred or arising, including, , without limitation, ail
sums arising under any ISDA Master Agreement now or hereafter executed between
Borrower and Lender and any related schedules and confirmations thereto
(hereinafter sometimes referred to as the "Obligations"), except for other
indebtedness, obligations and liabilities owing to Lender that constitute (a)
consumer credit as defined in Federal Reserve Board Regulation Z and either
subject to the disclosure requirements of Federal Reserve Board Regulation Z or
state consumer protection laws or (b) non-consumer credit if under applicable
state law the maximum interest rate for such credit is reduced when secured
(herein collectively referred to as "Restricted Debt"), the Borrower does hereby
grant to the Lender a security interest in, and does hereby assign, pledge,
transfer and convey to Leader the following described property:

Collateral more particularly described in Security Agreement-Commercial dated
February 24, 1999 between Borrower and Lender

whether now owned or hereafter acquired, together with any and all additions and
accessions thereto or replacements thereof, returned or unearned premiums from
any insurance written in connection with this Note and any products and/or
proceeds of any of the foregoing. In no event, however, shall the Lender have a
security interest in any goods acquired by the Borrower for personal, family or
household purposes more than 10 days after the date of this Note, unless such
goods are added to or attached to


<PAGE>

the collateral (as hereinafter defined). In addition, to the extent not
prohibited by law, the Borrower hereby grants to the Lender a security interest
in, and does hereby assign, pledge, transfer and convey to Lender, (i) all other
property of the Borrower now or hereafter in the possession or control of the
Lender (exclusive of any such property in the possession or control of the
Lender as a fiduciary other than as agent), including, without limitation, all
cash, stock or other dividends and all proceeds thereof, and all rights to
subscribe for securities incident thereto and any substitutions or replacements
for, or other rights in connection with, any of the Collateral and (ii) any of
Borrower's deposit accounts (as such term is defined in the Uniform Commercial
Code of the State of North Carolina, as the same may be amended from time to
time (the "Code")), whether such accounts be general or special, or individual
or multiple party, held by Lender and upon all drafts, notes, or other items
deposited for collection or presented for payment by the Borrower with the
Lender, and the Lender may at any time, without demand or notice, appropriate
and apply any of such to the payment of any of the Obligations (except for
Restricted Debt), whether or not due. All property described in this paragraph,
in which the Borrower has granted to the Lender a security interest or security
title hereunder, is herein collectively referred to as the "Collateral." If,
with respect to any Collateral in the form of investment securities, a stock
dividend is declared or any stock split-up made or right to subscribe issued,
all the certificates for the shares representing such stock dividend or spilt-up
or right to subscribe will be immediately delivered, duly endorsed, to the
Lender as additional Collateral. The Lender shall be deemed to have possession,
control and custody of any Collateral actually in transit to it or to any of its
officers or agents.

If at any time the Collateral pledged as security for any of the Obligations
shall be or become unsatisfactory to the Lender or should the Lender deem itself
insecure, the Borrower will immediately furnish such further property to be held
by the Lender as if originally pledged as Collateral hereunder or make such
payment on account as will be satisfactory to. the Lender.

The Lender shall have, but shall not be limited to, the following rights, each
of which may be exercised at any time or from time to time:( i) to transfer this
Note and the Collateral, and any transferee shall have all the rights of the
Lender hereunder and the Lender shall be thereafter relieved from any liability
with respect to any Collateral so transferred; (ii) to transfer the whole or any
part of the Collateral in the name of itself or its nominees; (iii) to vote any
investment securities forming a part of the Collateral; (iv) to notify the
obligors on any Obligation to make payment to the Lender of any amounts due
thereon; (v) to execute at any time in the name of any party hereto and to file
one or more financing statements describing the Collateral, which financing
statements may contain a generic collateral description that is broader than the
Collateral and which may describe any agricultural liens or other statutory
liens held by Lender; (vi) to receive or take control of any income or other
proceeds of any of the Collateral; and (vii) to request and receive current
financial information from any party liable for all or any part of the
Obligations.

Borrower will at Lender's request maintain insurance on the Collateral in
amounts at least equal to the fair market value of the Collateral and against
casualty, public liability and property damage risks and such other risks as
Lender may request; provided, however, if the Collateral described above is a
vehicle(s), Borrower agrees to obtain and maintain liability insurance as
required by law and collision and comprehensive insurance with a deductible not
exceeding $500.00. All insurance shall be with companies with a Best Insurance
Report Rating of B+ or better, and Borrower will pay all premiums for insurance
when due. Unless and until requested by Lender, Borrower shall not be required
to name Lender as additional insured in such policy or to provide Lender a copy
of the policy for or certificate evidencing such insurance, but when and if
requested by Lender, the Borrower shall immediately (but no later than five (5)
calendar days) (i) cause all policies of such insurance to specify that Lender
is an additional insured as its interests may appear and to provide that such
insurance shall not be cancellable by Borrower or the insurer without at least
30 days advance written notice to Lender and that proceeds are payable to Lender
regardless of any act or omission of Borrower which would otherwise result in a
denial of a claim; and (ii) deliver all policies or certificates thereof (with
copies of such policies) to Lender. In the event any or all of such insurance is
cancelled, any returned premium thereon may be collected by Lender and applied
by Lender to any part of the Obligations, either matured or unmatured. Lender is
authorized to receive the proceeds of any insurance loss and at the option of
Lender shall apply such proceeds toward either the repair or replacement of the
Collateral or the payment of the Obligations secured hereby. The undersigned
will also pay all taxes and other impositions on the Collateral as well as the
cost of repairs or maintenance to the Collateral. If the undersigned fails to
maintain such insurance or fails to pay any and all amounts for taxes, repairs,
maintenance and other costs, Lender may, at its option, but shall not be
required to, purchase such insurance or pay any premium owing with respect to
such insurance or pay such amounts for taxes, repairs, maintenance and other
costs, and any such sum paid by Lender shall be payable by the Borrower on
demand by Lender or at its option may be added to the Obligations and secured
hereby. The loss, injury or destruction of the Collateral, with or without the
fault of Borrower, shall not release the Borrower from any liability hereunder
or in any way affect Borrower's liability hereunder.

The occurrence of any one or more of the following conditions or events shall
constitute an "Event of Default" hereunder: (i) any failure of any Obligor
(which term shall include the Borrower and each endorser, surety or guarantor of
this Note) to pay any of the Obligations when due or to observe or perform any
agreement, covenant or promise hereunder or in any other agreement, note,
instrument or certificate of any Obligor to the Lender, now existing or
hereafter executed in connection with any of the Obligations, including, but not
limited to, a loan agreement, if applicable, and any agreement guaranteeing
payment of any of the Obligations; (ii) any default of any Obligor in the
payment or performance of any other liabilities, indebtedness or obligations to
Lender or any other creditor or to allow or permit any other liabilities,
indebtedness or obligations to Leader or any other creditor to be accelerated;
(iii) any failure of any Obligor to furnish Lender current financial information
upon request; (iv) any failure of any Obligor or any pledgor of any security
interest in the Collateral (the "Pledgor") to observe or perform any agreement,
covenant or promise contained in any agreement, instrument or certificate
executed in connection with the granting of a security interest in property to
secure the Obligations or any guaranty securing the Obligations; (v) any
warranty, representation or statement made or furnished to the Lender by or on
behalf of any Obligor or Pledgor in connection with the extension of credit
evidenced by this Note proving to have been false in any material respect when
made or furnished, (vi) any loss, theft, substantial damage, destruction, sale,
foreclosure of or encumbrance to any of the Collateral, or the making of any
levy, seizure or attachment thereof or thereon or the rendering of any judgment
or lien or garnishment or attachment against any Obligor or Pledgor or his
property, whether actual or threatened; (vii) the dissolution, change in
control, change of status to an organization, change of type of organization,
termination of existence, insolvency, business failure, or appointment of a
receiver of any part of the property of, assignment for the benefit of creditors
by, or the commencement of any proceeding under any bankruptcy or insolvency
laws, state or federal, by or against, the Borrower or any other Obligor or
Pledgor; (viii) if Borrower, any Pledgor or any Obligor shall change its name,
change its principal residence, change its chief executive office, change its
status to an organization, change its state of organization, change its type of
organization, or change its organizational identification number, as applicable,
without giving Secured Party at least thirty (30) days' written notice (ix) any
discontinuance or termination of any guaranty of any of the Obligations by a
guarantor; or (x) the Lender determining that some event has occurred, failed to
occur or is threatened, or some objective condition exists or is threatened,
which significantly impairs the prospects that any of the Obligations will be
paid when due or which significantly affects the financial or business condition
of any Obligor in an adverse manner, or the Collateral or any other property
securing the Obligations or any substantial portion thereof is in danger of
misuse, misappropriation or confiscation.

Upon the occurrence of an Event of Default (and the expiration of any applicable
notice and/or grace periods), to the extent permitted by law, the Lender at its
option may terminate any obligation to extend any additional credit or make any
other financial accommodation to the Borrower and/or may declare all of the
Obligations to be immediately due and payable, all without notice or demand, and
shall have in addition to and independent of the right to declare the
Obligations to be due and payable and any other rights of the Lender under this
Note or any other agreement with any Obligor or any Pledgor, the remedies of a
secured party under the Code, including, without limitation thereto, the right
to take possession of the Collateral, or the proceeds thereof and to sell or
otherwise dispose thereof, and for this purpose, to sign in the name of any
Obligor or Pledgor any transfer, conveyance or instrument necessary or
appropriate in order for the Lender to sell or dispose of any of the Collateral,
and the Lender may, so far as the Borrower can give authority therefor, enter
upon the premises on which the Collateral or any part thereof may be situated
and remove the same therefrom, without being liable in any way to any Obligor on
account of entering any premises. The Lender may require the Borrower to
assemble the Collateral and make the Collateral available to the Lender at a
place to be designated by the Lender which is reasonably convenient to both
parties. Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Lender shall
give the Borrower written notice of the time and place of any public sale
thereof or of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of sending reasonable notice
shall be met if such notice is mailed; postage prepaid, or otherwise given, to
the Borrower or Pledgor at the last address shown on the Lender's records at
least ten (10) days before such disposition. Lender may (i) comply with any
applicable state or federal law requirements in connection with a disposition of
the Collateral, (ii) sell the Collateral without giving any warranties as to the
Collateral, and (iii) specifically disclaim any warranties of title or the like
and in so doing any of the foregoing will not be considered adversely to affect
the commercial reasonableness of any sale of the Collateral. If any Obligation
(including but not limited to the Note) is a demand instrument, the


<PAGE>

statement of a maturity date, the requirement for the payment of periodic
interest or the recitation of defaults and the right of Lender to declare any
Obligation due and payable shall not constitute an election by Lender to waive
its right to demand payment under a demand at any time and in any event as
Lender in its sole discretion may deem appropriate.

The rights of the Lender specified herein shall be in addition to, and not in
limitation of the Lender's rights under the Code, or any other statute or rules
of law conferring rights similar to those conferred by the Code, and under the
provisions of any other instrument or agreement executed by the Borrower, any
other Obligor or any Pledgor to the Lender. All prior agreements to the extent
inconsistent with the terms of this Note shall be construed in accordance with
the provisions hereof. Any rights or remedies of the Lender may be exercised or
taken in any order or sequence whatsoever, at the sole option of the Lender.
This agreement shall bind and inure to the benefit of the heirs, legatees,
executors, administrators and assigns of Lender and shall bind all persons who
become bound as a debtor to this security agreement.

The security agreement set forth herein and the security interest in the
Collateral created hereby shall terminate only when all of the Obligations have
been indefeasibly paid in full and such payments are no longer subject to
rescission, recovery or repayment upon the bankruptcy, insolvency,
reorganization, moratorium, receivership or similar proceeding affecting the
Borrower or any other person. No waiver by the Lender of any default shall be
effective unless in writing nor operate as a waiver of any other default or of
the same default an a future occasion. All rights of the Lender hereunder shall
inure to the benefit of its successors and assigns, and all obligations of the
Borrower shall bind the heirs; legal representatives, successors and assigns of
the Borrower. The Borrower and each endorser, surety or guarantor of this Note,
whether bound by this or by separate instrument or agreement, shall be jointly
and severally liable for the indebtedness evidenced by this Note and hereby
severally ( i) waive presentiment for payment, demand, protest, notice of
nonpayment or dishonor and of protest and any and all other notices and demands
whatsoever; to the fullest extent permitted by applicable law; (ii) consent that
at any time, or from time to time, payment of any sum payable under this Note
may` be extended without notice whether for a definite or indefinite time; and
(iii) agree to remain liable until all of the Obligations are paid in full
notwithstanding any impairment, substitution, release or transfer of Collateral
or any one or more Borrower or Obligor by the Lender, with or without
consideration, or of any extension, modification or renewal. No conduct of the
holder shall be deemed a waiver or release of such liability, unless the holder
expressly releases such party in writing. The Borrower shall pay to the holder
on demand all expenses, including reasonable attorneys' fees and expenses of
legal counsel, incurred by the holder in any way arising from or relating to the
enforcement or attempted enforcement of the Note and any related guaranty,
collateral document or other document and the collection or attempted
collection, whether by litigation or otherwise, of the Note. Time is of the
essence.

Borrower acknowledges that Lender may reproduce (by electronic means or
otherwise) any of the documents evidencing and/or securing the Obligations and
thereafter may destroy the original documents. Borrower does hereby agree that
any document so reproduced shall be and remain the binding obligation of
Borrower, enforceable and admissible in evidence against it to the same extent
as if the original documents had not been destroyed.

This Note, and the rights and obligations of the parties hereunder, shall be
governed and construed in accordance with the laws of the State of North
Carolina, except to the extent that the Code provides for the application of
other law with respect to the Collateral.

IN WITNESS WHEREOF, the Borrower has executed this Note under seal the day and
year set forth above.


                            Borrower:

                            Prime/Home Impressions, LLC

                            By:      /s/ Robert W. Lackey                 (SEAL)
                               -------------------------------------------------
                                     Robert W. Lackey, Sr.
                            Title: Group A. Manager


                            By:      /s/ Neall W. Humphrey                (SEAL)
                               -------------------------------------------------
                                     Neall W. Humphrey
                            Title: Group B Manager


                            By:      /s/ Robert W. Lackey                 (SEAL)
                               -------------------------------------------------
                            Home/Impressions, Inc, by its Vice President,
                            Robert W. Lackey, Sr.
                            Title:  Group A Member


                            By:      /s/ James R. Ridings                 (SEAL)
                               -------------------------------------------
                            Trade Source International, Inc. by its President,
                            James R. Ridings
                            Title: Group B Member



<PAGE>


                                   SCHEDULE 1


This Schedule is referenced on the Note and Security Agreement dated April 17,
2002 in the stated amount of $3,000,000.00 (the "Note") between Prime/Home
Impressions, LLC ("Borrower") and Wachovia Bank N.A. ("Lender") and shall be
considered a part thereof to the same extent as if written therein.

     The Note shall bear interest from the date hereof at a rate per annum equal
to the Monthly LIBOR Index plus two percent (2.00%).

     As used herein, the "Monthly LIBOR Index" shall mean a rate per annum equal
to LIBOR (determined in accordance with the paragraph below), adjusted for all
applicable Costs (as hereinafter defined). The Monthly LIBOR Index shall be
adjusted on the first day of each calendar month and shall be further adjusted
on and as of the effective date of changes in the Lender's Costs. As used
herein, "Costs" shall mean any charges, fees or costs incurred by the Lender as
the result of any changes in the-laws, rules, regulations, or governmental
requirements pertaining to LIBOR loans.

     As used herein, "LIBOR" shall mean the rate per annum (rounded upward to
the next higher of 1/10,000 of 1%) for deposits of United States dollars with
maturities of one month, that. appears on the display designated as page "3750"
of the Telerate Service (or such other page as may replace 3750 of that service
or such other service or services as may be designated by the British Bankers'
Association for the purpose of displaying London Interbank Offered Rate for U.
S. Dollar deposits), determined as of 11:00 a.m. London time, two (2) Business
Days prior to the first day of each calendar month.

     As used herein, "Business Day" shall mean a day on which dealings in United
States dollar deposits are being carried out in the London interbank eurodollar
market.

     Notwithstanding any provisions herein to the contrary, if the Lender should
at anytime be unable to determine LIBOR, then the Monthly LIBOR Index shall be
based on an interest rate selected by the Lender in good faith that approximates
one month LIBOR taking into account rates in relevant markets. Such rate shall
be in effect until the first day of the next calendar month on which LIBOR is
determinable.


<PAGE>

GUARANTY AGREEMENT


WHEREAS. the undersigned has requested Wachovia Bank, N.A. (herein called the
"Lender") to extend credit or make certain financial accommodations to
Prime/Home Impressions. LLC (herein called the "Borrower") or to renew, or
extend, in whole or in part, existing indebtedness or financial accommodations
of the Borrower to the Lender, and the Lender has extended credit or extended or
renewed existing indebtedness or made financial accommodations and/or may in the
future extend credit or extend or renew existing indebtedness or make certain
financial accommodations by reason of such request and in reliance upon this
guaranty;

NOW, THEREFORE, in consideration of such credit extended or renewed and/or to be
extended or renewed or such financial accommodations made or to be made in its
discretion by the Lender to the Borrower (whether to the same, greater or lesser
extent than any limit, if applicable, of this guaranty), in consideration of One
Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the undersigned hereby unconditionally
guarantees to the Lender and its successors, endorsees, transferees and assigns,
the punctual payment when due, whether by acceleration or otherwise, and at all
times thereafter of (a) all debts, liabilities and obligations whatsoever of the
Borrower to the Lender, now existing. or hereafter coming into existence,
whether joint or several, whether created directly or acquired by endorsement,
assignment or otherwise, whether absolute or contingent, secured or unsecured,
due or not due, including but not being limited to notes, checks, drafts,
credits, advances, and obligations to reimburse draws against letters of credit;
(b) accrued but unpaid interest on such debts, liabilities and obligations,
whether accruing before or after any maturity(ies) thereof, and (c) all
expenses, including reasonable attorneys' fees and expenses of legal counsel
incurred by Lender if any such debts, liabilities or obligations of the Borrower
are collected, or the liability of the undersigned hereunder enforced, by or
through any attorney at law (all of (a), (b) and (c) being hereinafter referred
to as the "Obligations"). References herein to Borrower shall be deemed to
include any successor corporations to Borrower, if Borrower is a corporation, or
any reconstituted partnerships of Borrower, if Borrower is a partnership.

The undersigned consents that, at any time, and from time to time, either with
or without consideration, the whole or any part of any security now or hereafter
held for any Obligations may be substituted, exchanged, compromised, impaired,
released, or surrendered with or without consideration; the time or place of
payment of any Obligations or of any security thereof may be changed or
extended, in whole or in part, to a time certain or otherwise, and may be
renewed or accelerated, in whole or in part; the Borrower may be granted
indulgences generally; any of the provisions of any note or other instrument
evidencing any Obligations of any security therefor may be modified or waived;
any party liable for the payment thereof (including but not being limited to any
co-guarantor) may be granted indulgences or released; neither the death,
termination of existence, bankruptcy, incapacity, lack of authority nor
disability of the Borrower or any one or more of the guarantors, including any
of the undersigned, shall affect the continuing obligation of any other
guarantor, including any of the undersigned, and that no claim need be asserted
against the personal representative, guardian,


<PAGE>

custodian, trustee or debtor in bankruptcy or receiver of any deceased,
incompetent, bankrupt or insolvent guarantor, any deposit balance to the credit
of the Borrower or any other party liable for the payment of the Obligations or
liable upon any security therefor may be released, in whole or in part, at,
before and/or after the stated, extended or accelerated maturity of any
Obligations; and the Lender may release, discharge, compromise or enter into any
accord and satisfaction with respect to any collateral for the Obligations, or
the liability of the Borrower or any of the undersigned, or any liability of any
other person primarily or secondarily liable on any of the Obligations, all
without notice to or further assent by the undersigned, who shall remain bound
hereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence, release, discharge or accord
and satisfaction.

Without limiting any of the foregoing, in the event of incompetency, or
dissolution of the Borrower, or should the Borrower become insolvent (as defined
by the Uniform Commercial Code as in effect for the State of North Carolina, or
if a petition in bankruptcy be filed by or against the Borrower, or if a
receiver be appointed for any part of the property or assets of the Borrower, or
if any final judgment for money damages be entered against the Borrower in a
court of competent jurisdiction and remain unsatisfied for a period of thirty
(30) days or more, or if the Lender shall deem itself insecure with respect to
the Obligations and whether or not such event occurs at a time when any of such
Obligations are otherwise due and payable, the undersigned agrees to pay to the
Lender upon demand the full amount which would be payable hereunder by the
undersigned if all such Obligations were then due and payable.

The undersigned expressly waives: (a) notice of acceptance of this guaranty and
of all extensions or renewals of credit or other financial accommodations to the
Borrower; (b) presentment and demand for payment of any of the Obligations; (c)
protest and notice of dishonor or of default to the undersigned or to any other
party with respect to any of the Obligations or with respect to any security
therefor; (d) any invalidity or disability in whole or in part at the time of
the acceptance of, or at any time with respect to, any security for the
Obligations or with respect to any party primarily or secondarily liable for the
payment of the Obligations to the Lender; (e) the fact that any security for the
Obligations may at any time or from time to time be in default or be
inaccurately estimated or may deteriorate in value for any cause whatsoever; (f)
any diligence in the creation or perfection of a security interest or collection
or protection of or realization upon the Obligations or any security therefor,
any liability hereunder, or any party primarily or secondarily liable for the
Obligations or any lack of commercial reasonableness in dealing with any
security for the Obligations; (g) any duty or obligation on the part of the
Lender to ascertain the extent or nature of any security for the Obligations, or
any insurance or other rights respecting such security, or the liability of any
party primarily or secondarily liable for the Obligations, or to take any steps
or action to safeguard, protect, handle, obtain or convey information
respecting, or otherwise follow in any manner, any such security, insurance or
other rights; (h) any duty or obligation on the Lender to proceed to collect the
Obligations from, or to commence an action against, the Borrower, any other
guarantor, or any other person, or to resort to any security or to any balance
of any deposit account or credit on the books of the Lender in favor of the
Borrower or any other person, despite any notice or request of the undersigned
to do so; (i) to the extent not prohibited by law, the right to assert any of
the. benefits under any statute providing appraisal or other rights which may
reduce or prohibit any deficiency judgments in any foreclosure or

                                                                               2
<PAGE>

other action; (j) all other notices to which the undersigned might otherwise be
entitled; (k) demand for payment under this guaranty; or (l) any rights of the
undersigned pursuant to North Carolina General Statutes Section 26-7 or any
similar or subsequent law.

This is a guaranty of payment and not of collection. The liability of the
undersigned on this guaranty shall be continuing, direct and immediate and not
conditional or contingent upon either the pursuit of any remedies against the
Borrower or any other person or foreclosure of any security interests or liens
available to the Lender, its successors, endorsees or assigns. The Lender may
accept any payment(s), plan for adjustment of debts, plan for reorganization or
liquidation, or plan of composition or extension proposed by, or on behalf of,
the Borrower or any other guarantor without in any way affecting or discharging
the liability of the undersigned hereunder. If the Obligations are partially
paid, the undersigned shall remain liable for any balance of such Obligations.
This guaranty shall be revived and reinstated in the event that any payment
received by Lender on any Obligation is required to be repaid or rescinded under
present or future federal or state law or regulation relating to bankruptcy,
insolvency or other relief of debtors. The undersigned agrees to furnish
promptly to the Lender annual financial statements and such other current
financial information as the Lender may reasonably request from time to time.

The undersigned expressly represents and acknowledges that loans and other
financial accommodations by the Lender to the Borrower are and will be to the
direct interest and advantage of the undersigned.

The Lender may, without notice of any kind, sell, assign or transfer all or any
of the Obligations, and in such event each and every immediate and successive
assignee, transferee, or holder of all or any of the Obligations shall have the
right to enforce this guaranty, by suit or otherwise, for the benefit of such
assignee, transferee or holder, as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, powers and benefits,
but the Lender shall have an unimpaired right, prior and superior to that of any
such assignee, transferee or holder, to enforce this guaranty for the benefit of
the Lender, as to so much of the Obligations as it has not sold, assigned or
transferred.

No delay or failure on the part of the Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Lender of any right or remedy shall preclude other or further exercise of
any other right or remedy.

For the purpose of this guaranty, the Obligations shall include all debts,
liabilities and obligations of the Borrower to the Lender, notwithstanding any
right or power of the Borrower or anyone else to assert any claim or defense as
to the invalidity or unenforceability thereof, and no such claim or defense
shall impair or affect the obligations and liabilities of the undersigned
hereunder. Without limiting the generality of the foregoing, if the Borrower is
a corporation, partnership, joint venture, trust or other form of business
organization, this guaranty covers all Obligations purporting to be made in
behalf of such organization by any officer or agent of the same, without regard
to the actual authority of such officer or agent. The term "corporation" shall
include associations of all kinds and all purported corporations, whether or not
correctly and legally chartered and organized.



                                                                               3
<PAGE>

To the extent not prohibited by law, the undersigned hereby grants to the Lender
a security interest in and security title to and hereby assigns, pledges,
transfers and conveys to Lender (i) all property of the undersigned of every
kind or description now or hereafter in the possession or control of the Lender,
exclusive of any such property in the possession or control of the Lender as a
fiduciary other than as agent, for any reason including, without limitation, all
cash, stock or other dividends and all proceeds thereof, and all rights to
subscribe for securities incident thereto and any substitutions or replacements
therefor and (ii) any balance or deposit accounts of the undersigned, whether
such accounts be general or special, or individual or multiple party, and upon
all drafts, notes, or other items deposited for collection or presented for
payment by the undersigned with the Lender, exclusive of any such property in
the possession or control of the Lender as a fiduciary other than as agent, and
the Lender may at any time, without demand or notice, appropriate and apply any
of such to the payment of any of the Obligations, whether or not due, except for
other indebtedness, obligations and liabilities owing to Lender that constitute
(a) consumer credit as defined in Federal Reserve Board Regulation Z or (b)
non-consumer credit if under applicable state law the maximum interest rate for
such credit is reduced when secured.

Any amount received by the Lender from whatever source and applied by it toward
the payment of the Obligations shall be applied in such order of application as
the Lender may from time to time elect.

This guaranty shall bind and inure to the benefit of the Lender, its successors
and assigns, and likewise shall bind and inure to the benefit of the
undersigned, their heirs, executors, administrators, successors and assigns. If
more than one person shall execute this guaranty or a similar, contemporaneous
guaranty, the term "undersigned," shall mean, as used herein, all parties
executing this guaranty and such similar guaranties and all such parties shall
be liable, jointly and severally, one with the other and with the Borrower, for
each of the undertakings, agreements, obligations, covenants and liabilities
provided for herein with respect to the undersigned. This guaranty contains the
entire agreement and there is no understanding that any other person shall
execute this or a similar guaranty. Furthermore, no course of dealing between
the parties, no usage of trade, and no parole or extrinsic evidence shall be
used to supplement or modify any terms of this guaranty; nor are there any
conditions to the complete effectiveness of this guaranty.

This guaranty shall be deemed accepted by Lender in the State of North Carolina.
The parties agree that this guaranty shall be deemed, made, delivered, performed
and accepted by Lender in the State of North Carolina and shall be governed by
the laws of the State of North Carolina. Wherever possible each provision of
this guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provisions of this guaranty shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this guaranty.

The undersigned (a) submits to personal jurisdiction in the State of North
Carolina, the courts thereof and any United States District Court sitting
therein, for the enforcement of this



                                                                               4
<PAGE>

guaranty, (b) waives any and all personal rights under the law of any
jurisdiction to object on any basis (including, without limitation,
inconvenience of forum) to jurisdiction or venue within the State of North
Carolina, for the purpose of litigation to enforce this guaranty, and (c) agrees
that service of process may be made upon the undersigned by first class postage
prepaid mail, addressed to the undersigned at the latest address of the
undersigned known to the Lender (or at such other address as the undersigned may
specify for the purpose by notice to the Lender). Nothing herein contained,
however, shall prevent the Lender from bringing any action or exercising any
rights against any security and against the Borrower personally, and against any
assets of the Borrower, within any other state or jurisdiction.

Guarantor acknowledges that Lender may reproduce (by electronic means or
otherwise) any of the documents evidencing and/or securing the Obligations and
thereafter may destroy the original documents. Guarantor does hereby agree that
any document so reproduced shall be and remain the binding obligation of
Guarantor, enforceable and admissible in evidence against it to the same extent
as if the original documents had not been destroyed.

This guaranty shall remain in full force and effect as to each of the
undersigned unless and until terminated as to one or more of the undersigned by
notice to that effect actually received by the Lender, by registered mail,
addressed to Lender at 100 North Main Street, Winston-Salem, North Carolina
27101, but no such notice shall affect or impair the liabilities hereunder of
such of the undersigned who gives or on whose behalf is given any such notice
for the Obligations existing at the date of receipt by the Lender of such
notice, any renewals, modifications, or extensions thereof (whether made before
or after such notice is received), any interest thereon, or any costs or
expenses, including without limitation, attorneys' fees incurred in the
collection thereof or any future advances made by Lender to Borrower as required
or permitted pursuant to the terms of the instruments, documents or agreements
evidencing or providing for the Obligations. Any such notice of termination by
or on behalf of any of the undersigned shall affect only that person and shall
not affect or impair the liabilities and obligations hereunder of any other
person.

The undersigned hereby expressly waives, for Lender's benefit and the benefit of
the Borrower and any other guarantor, maker or endorser of the Obligations, any
and all claims or actions against the Borrower, any other guarantor, maker or
endorser of the Obligations and any and all rights of recourse against any
property or assets of the Borrower, any other guarantor, maker or endorser of
the Obligations (including without limitation any security for the Obligations)
arising out of or related to any payment made by the undersigned under this
guaranty, including, without limitation, any claim of the undersigned for
subrogation, reimbursement, exoneration, contribution or indemnity that the
undersigned may have against the Borrower, any other guarantor, maker or
endorser of the Obligations and any benefit of, and any other right to
participate in, any security for the Obligations or any guaranty of the
Obligations now or hereafter held by Lender. The waiver contained in this
paragraph shall continue and survive after the termination of this guaranty and
the payment of the Obligations

The terms and provisions of any addendum attached hereto are incorporated herein
by reference and made a part hereof.



                                                                               5
<PAGE>

IN WITNESS WHEREOF, each of the undersigned has executed this guaranty under
seal this 2nd day of March, 2001.


                                             Craftmade International, Inc.



                                                 /s/ James R. Ridings     (SEAL)
                                             -----------------------------------
                                             By:    James R. Ridings
                                             Title: President



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>4
<FILENAME>d01310exv10w26.txt
<DESCRIPTION>NOTE AND SECURITY AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.26

NOTE AND SECURITY AGREEMENT

Hickory, North Carolina

Date April 29, 2002                                                  $500,000.00

FOR VALUE RECEIVED, Prime/Home Impressions, LLC, limited liability company
organized and existing under the laws of the State of North Carolina and whose
chief executive office is located at 420 3rd Avenue NW, Hickory, North Carolina
28601 (hereinafter the "Borrower"), hereby promises to pay to the order of
Wachovia Bank, N.A. (hereinafter the "Lender") at its office where borrowed, or
at such other place as Lender hereafter may direct from time to time in writing,
in immediately available fiends of lawful money of the United States, the sum of
Five Hundred Thousand and 00/100 Dollars together with any unpaid interest
hereon from date of advance, in accordance with the terms contained in this Note
and Security Agreement (hereinafter referred to as the "Note"). The optional
provisions applicable to this Note are checked below.

REPAYMENT:

[ ] One payment in full of principal and unpaid interest due ____________

[ ] One demand _______________________________

[X] 36 payments of $13,888.89 beginning August 29, 2002 and thereafter Monthly
    until July 29, 2005,

    When the entire principal amount then outstanding and all accrued but unpaid
    interest shall be paid in full.

[ ] On demand the principal amount set forth above or the unpaid principal
    amount of all advances which the Lender actually makes hereunder to the
    Borrower, whichever amount is less. The Borrower may borrow, repay and
    reborrow sums up to the principal amount set forth above. This Note shall be
    used to evidence the outstanding principal balance advanced hereunder until
    it is surrendered to the Borrower by the Lender, and it shall continue to be
    used even though there may be periods prior to such surrender when no amount
    of principal or interest is owing hereunder. If advances of the principal
    amount hereof are to be made by Lender to the Borrower after the date of
    this Note, Lender, at its sole discretion, is hereby authorized to make such
    advances under this Note upon telephonic or written communication of a
    borrowing request from any Person representing himself or herself to be the
    Borrower or, in the event the Borrower is an organization, a duly authorized
    officer or representative of Borrower.

INTEREST:
Payable: [X] in arrears; [ ]  in advance
         [X] in addition to the payments described above;
         [ ] included in the payments described above.

Payable at the rate per annum of [ ] Prime Rate plus ________%; [ ] ________% of
Prime Rate; [ ] ___________ % Fixed;

    [ ]  Those rates which may be offered from time to time by the Lender and
         agreed to by the Borrower and so noted by the Lender on an attachment
         hereto. In the event of a good faith dispute among the parties to this
         Note as to rate under this rate option, the rate shall be the Prime
         Rate, adjusted for any changes in the Prime Rate as of the day such
         Rime Rate changes;

    |X|  The rate(s) set forth in Schedule 1 attached to this Note and
         incorporated herein by reference;

    [ ]  Those rates which have been offered by the Lender to the Borrower in
         the Lo an Agreement or Commitment Letter checked below, the provisions
         of which shall determine such rates, the procedure for the selection of
         such rates and the time periods for which such rates shall apply.

In no case shall interest exceed the maximum rate permitted by applicable law.

If the interest is based upon the Prime Rate, such interest rate will be
adjusted on: [ ] The day the Prime Rate changes [ ] Other _______________

Due: [X]  On principal payment dates   Other [ ] ______________________________

Interest will be calculated on the basis of [X] A year of 360 days and paid for
the actual number of days elapsed [ ] Other _______________________

After demand or maturity (whether by acceleration or otherwise), as applicable,
interest on any unpaid balance hereof shall be payable on demand at a rate per
annum-equal to the greater of 150 % of the Prime Rate, or 2 % above the rate
applicable prior to demand or maturity, adjusted for any changes in the Prime
Rate as of the day such Prime Rate changes, not to exceed the maximum rate
permitted by applicable law.

To the extent not prohibited by law, a late charge of four percent (4%) or the
applicable statutory maximum, whichever is greater, shall be assessed on any
payment remaining past due for fifteen (15) days or more unless interest on this
Note is payable in advance, in which case such period shall instead be thirty
(30) days or more; provided, however, that if any applicable statute allows, a
shorter minimum time period for the imposition of a late charge, such shorter
time period shall prevail.

As used herein, "Prime Rate" refers to that interest rate so denominated and set
by the Lender from time to time as an interest rate basis for borrowings. The
Prime Rate is one of several interest rate bases used by the Lender. The Lender
lends at interest rates above and below the Prime Rate.

All payments on this Note shall be applied, in accordance with the then current
billing statement applicable to this Note, first to accrued interest, then to
fees, then to principal due and then to late charges. Any remaining funds shall
be applied to the further reduction of principal. Notwithstanding the foregoing,
upon the occurrence of a default hereunder, payments shall be applied as
determined by Lender in its sole discretion.

[ ]   The terms and conditions in a Loan Agreement dated ___________________
      between the parties hereto, as the same may be amended from time to time,
      shall be considered a part hereof to the same extent as if written herein.

[ ]   The terms and conditions in a Commitment Letter dated ___________________
      from the Lender to the Borrower, as the same may be amended, extended or
      replaced from time to time, shall be considered a part hereof to the same
      extent as if written herein.

In addition to any other collateral specified herein and in other agreements, to
secure the indebtedness evidenced by this Note, together with any extensions,
modifications, or renewals thereof, in whole or in part, as well as all other
indebtedness, obligations and liabilities of the Borrower to the Lender, now
existing or hereafter incurred or arising, including, without limitation, all
sums arising under any ISDA Master Agreement now or hereafter executed between
Borrower and Lender and any related schedules and confirmations thereto
(hereinafter sometimes referred to as the "Obligations"), except for other
indebtedness, obligations and liabilities owing to Lender that constitute (a)
consumer credit as defined in Federal Reserve Board Regulation Z and either
subject to the disclosure requirements of Federal Reserve Board Regulation Z or
state consumer protection laws or (b) non-consumer credit if under applicable
state law the maximum interest rate for such credit is reduced when secured
(herein collectively referred to as "Restricted Debt"), the Borrower does hereby
grant to the Lender a security interest in, and does hereby assign, pledge,
transfer and convey to Leader the following described property:

Collateral more particularly described in Security Agreement-Commercial dated
April 29, 2002 between Borrower and Lender.

whether now owned or hereafter acquired, together with any and all additions and
accessions thereto or replacements thereof, returned or unearned premiums from
any insurance written in connection with this Note and any products and/or
proceeds of any of the foregoing. In no event, however, shall the Lender have a
security interest in any goods acquired by the Borrower for personal, family or
household purposes more than 10 days after the date of this Note, unless such
goods are added to or attached to the collateral (as hereinafter defined). In
addition, to the extent not prohibited by law, the Borrower hereby grants to the
Lender a security interest in, and does hereby assign, pledge, transfer and
convey to Lender, (i) all other property of the Borrower now or hereafter in the
possession or control of the Lender (exclusive of any such property in the
possession or control of the Lender as a fiduciary other than as agent),
including, without limitation, all cash, stock or other dividends and all
proceeds



<PAGE>

thereof, and all rights to subscribe for securities incident thereto and any
substitutions or replacements for, or other rights in connection with, any of
the Collateral and (ii) any of Borrower's deposit accounts (as such term is
defined in the Uniform Commercial Code of the State of North Carolina, as the
same may be amended from time to time (the "Code")), whether such accounts be
general or special, or individual or multiple party, held by Lender and upon all
drafts, notes, or other items deposited for collection or presented for payment
by the Borrower with the Lender, and the Lender may at any time, without demand
or notice, appropriate and apply any of such to the payment of any of the
Obligations (except for Restricted Debt), whether or not due. All property
described in this paragraph, in which the Borrower has granted to the Lender a
security interest or security title hereunder, is herein collectively referred
to as the "Collateral." If, with respect to any Collateral in the form of
investment securities, a stock dividend is declared or any stock split-up made
or right to subscribe issued, all the certificates for the shares representing
such stock dividend or spilt-up or right to subscribe will be immediately
delivered, duly endorsed, to the Lender as additional Collateral. The Lender
shall be deemed to have possession, control and custody of any Collateral
actually in transit to it or to any of its officers or agents.

If at any time the Collateral pledged as security for any of the Obligations
shall be or become unsatisfactory to the Lender or should the Lender deem itself
insecure, the Borrower will immediately furnish such further property to be held
by the Lender as if originally pledged as Collateral hereunder or make such
payment on account as will be satisfactory to the Leader.

The Lender shall have, but shall not be limited to, the following rights, each
of which may be exercised at any time or from time to time:( i) to transfer this
Note and the Collateral, and any transferee shall have all the rights of the
Lender hereunder and the Lender shall be thereafter relieved from any liability
with respect to any Collateral so transferred; (ii) to transfer the whole or any
part of the Collateral in the name of itself or its nominees; (iii) to vote any
investment securities forming a part of the Collateral; (iv) to notify the
obligors on any Obligation to make payment to the Lender of any amounts due
thereon; (v) to execute at any time in the name of any party hereto and to file
one or more financing statements describing the Collateral, which financing
statements may contain a generic collateral description that is broader than the
Collateral and which may describe any agricultural liens or other statutory
liens held by Lender; (vi) to receive or take control of any income or other
proceeds of any of the Collateral; and (vii) to request and receive current
financial information from any party liable for all or any part of the
Obligations.

Borrower will at Lender's request maintain insurance on the Collateral in
amounts at least equal to the fair market value of the Collateral and against
casualty, public liability and property damage risks and such other risks as
Lender may request; provided, however, if the Collateral described above is a
vehicle(s), Borrower agrees to obtain and maintain liability insurance as
required by law and collision and comprehensive insurance with a deductible not
exceeding $500.00. All insurance shall be with companies with a Best Insurance
Report Rating of B+ or better, and Borrower will pay all premiums for insurance
when due. Unless and until requested by Lender, Borrower shall not be required
to name Lender as additional insured in such policy or to provide Lender a copy
of the policy for or certificate evidencing such insurance, but when and if
requested by Lender, the Borrower shall immediately (but no later than five (5)
calendar days) (i) cause all policies of such insurance to specify that Lender
is an additional insured as its interests may appear and to provide that such
insurance shall not be cancellable by Borrower or the insurer without at least
30 days advance written notice to Lender and that proceeds are payable to Lender
regardless of any act or omission of Borrower which would otherwise result in a
denial of a claim; and (ii) deliver all policies or certificates thereof (with
copies of such policies) to Lender. In the event any or all of such insurance is
cancelled, any returned premium thereon may be collected by Lender and applied
by Lender to any part of the Obligations, either matured or unmatured. Lender is
authorized to receive the proceeds of any insurance loss and at the option of
Lender shall apply such proceeds toward either the repair or replacement of the
Collateral or the payment of the Obligations secured hereby. The undersigned
will also pay all taxes and other impositions on the Collateral as well as the
cost of repairs or maintenance to the Collateral. If the undersigned fails to
maintain such insurance or fails to pay any and all amounts for taxes, repairs,
maintenance and other costs, Lender may, at its option, but shall not be
required to, purchase such insurance or pay any premium owing with respect to
such insurance or pay such amounts for taxes, repairs, maintenance and other
costs, and any such sum paid by Lender shall be payable by the Borrower on
demand by Lender or at its option may be added to the Obligations and secured
hereby. The loss, injury or destruction of the Collateral, with or without the
fault of Borrower, shall not release the Borrower from any liability hereunder
or in any way affect Borrower's liability hereunder.

The occurrence of any one or more of the following conditions or events shall
constitute an "Event of Default" hereunder: (i) any failure of any Obligor
(which term shall include the Borrower and each endorser, surety or guarantor of
this Note) to pay any of the Obligations when due or to observe or perform any
agreement, covenant or promise hereunder or in any other agreement, note,
instrument or certificate of any Obligor to the Lender, now existing or
hereafter executed in connection with any of the Obligations, including, but not
limited to, a loan agreement, if applicable, and any agreement guaranteeing
payment of any of the Obligations; (ii) any default of any Obligor in the
payment or performance of any other liabilities, indebtedness or obligations to
Lender or any other creditor or to allow or permit any other liabilities,
indebtedness or obligations to Leader or any other creditor to be accelerated;
(iii) any failure of any Obligor to furnish Lender current financial information
upon request; (iv) any failure of any Obligor or any pledgor of any security
interest in the Collateral (the "Pledgor") to observe or perform any agreement,
covenant or promise contained in any agreement, instrument or certificate
executed in connection with the granting of a security interest in property to
secure the Obligations or any guaranty securing the Obligations; (v) any
warranty, representation or statement made or furnished to the Lender by or on
behalf of any Obligor or Pledgor in connection with the extension of credit
evidenced by this Note proving to have been false in any material respect when
made or furnished, (vi) any loss, theft, substantial damage, destruction, sale,
foreclosure of or encumbrance to any of the Collateral, or the making of any
levy, seizure or attachment thereof or thereon or the rendering of any judgment
or lien or garnishment or attachment against any Obligor or Pledgor or his
property, or threatened; (vii) the dissolution, change in control, change of
status to an organization, change of type of organization, termination of
existence, insolvency, business failure, or appointment of a receiver of any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy or insolvency laws, state or
federal, by or against, the Borrower or any other Obligor or Pledgor; (viii) if
Borrower, any Pledgor or any Obligor shall change its name, change its principal
residence, change its chief executive office, change its status to an
organization, change its state of organization, change its type of organization,
or change its organizational identification number, as applicable, without
giving Secured Party at least thirty (30) days' written notice, (ix) any
discontinuance or termination of any guaranty of any of the Obligations by a
guarantor; or (x) the Lender determining that some event has occurred, failed to
occur or is threatened, or some objective condition exists or is threatened,
which significantly impairs the prospects that any of the Obligations will be
paid when due or which significantly affects the financial or business condition
of any Obligor in an adverse manner, or the Collateral or any other property
securing the Obligations or any substantial portion thereof is in danger of
misuse, misappropriation or confiscation.

Upon the occurrence of an Event of Default (and the expiration of any applicable
notice and/or grace periods), to the extent permitted by law, the Lender at its
option may terminate any obligation to extend any additional credit or make any
other financial accommodation to the Borrower and/or may declare all of the
Obligations to be immediately due and payable, all without notice or demand, and
shall have in addition to and independent of the right to declare the
Obligations to be due and payable and any other rights of the Lender under this
Note or any other agreement with any Obligor or any Pledgor, the remedies of a
secured party under the Code, including, without limitation thereto, the right
to take possession of the Collateral, or the proceeds thereof and to sell or
otherwise dispose thereof, and for this purpose, to sign in the name of any
Obligor or Pledgor any transfer, conveyance or instrument necessary or
appropriate in order for the Lender to sell or dispose of any of the Collateral,
and the Lender may, so far as the Borrower can give authority therefor, enter
upon the premises on which the Collateral or any part thereof may be situated
and remove the same therefrom, without being liable in any way to any Obligor on
account of entering any premises. The Lender may require the Borrower to
assemble the Collateral and make the Collateral available to the Lender at a
place to be designated by the Lender which is reasonably convenient to both
parties. Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Lender shall
give the Borrower written notice of the time and place of any public sale
thereof or of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of sending reasonable notice
shall be met if such notice is mailed; postage prepaid, or otherwise given, to
the Borrower or Pledgor at the last address shown on the Lender's records at
least ten (10) days before such disposition. Lender may (i) comply with any
applicable state or federal law requirements in connection with a disposition of
the Collateral, (ii) sell the Collateral without giving any warranties as to the
Collateral, and (iii) specifically disclaim any warranties of title or the like
and in so doing any of the foregoing will not be considered adversely to affect
the commercial reasonableness of any sale of the Collateral. If any Obligation
(including but not limited to the Note) is a demand instrument, the statement of
a maturity date, the requirement for the payment of periodic interest or the
recitation of defaults and the right of Lender to declare any Obligation due and
payable shall not constitute an election by Lender to waive its right to demand
payment under a demand at any time and in any event as Lender in its sole
discretion may deem appropriate.


<PAGE>

The rights of the Lender specified herein shall be in addition to, and not in
limitation of the Lender's rights under the Code, or any other statute or rules
of law conferring rights similar to those conferred by the Code, and under the
provisions of any other instrument or agreement executed by the Borrower, any
other Obligor or any Pledgor to the Lender. All prior agreements to the extent
inconsistent with the terms of this Note shall be construed in accordance with
the provisions hereof. Any rights or remedies of the Lender may be exercised or
taken in any order or sequence whatsoever, at the sole option of the Lender.
This agreement shall bind and inure to the benefit of the heirs, legatees,
executors, administrators and assigns of Lender and shall bind all persons who
become bound as a debtor to this security agreement.

The security agreement set forth herein and the security interest in the
Collateral created hereby shall terminate only when all of the Obligations have
been indefeasibly paid in full and such payments are no longer subject to
rescission, recovery or repayment upon the bankruptcy, insolvency,
reorganization, moratorium, receivership or similar proceeding affecting the
Borrower or any other person. No waiver by the Lender of any default shall be
effective unless in writing nor operate as a waiver of any other default or of
the same default on a future occasion. All rights of the Lender hereunder shall
inure to the benefit of its successors and assigns, and all obligations of the
Borrower shall bind the heirs, legal representatives, successors and assigns of
the Borrower. The Borrower and each endorser, surety or guarantor of this Note,
whether bound by this or by separate instrument or agreement, shall be jointly
and severally liable for the indebtedness evidenced by this Note and hereby
severally ( i) waive presentiment for payment, demand, protest, notice of
nonpayment or dishonor and of protest and any and all other notices and demands
whatsoever; to the fullest extent permitted by applicable law; (ii) consent that
at any time, or from time to time, payment of any sum payable under this Note
may be extended without notice whether for a definite or indefinite time; and
(iii) agree to remain liable until all of the Obligations are paid in full
notwithstanding any impairment, substitution, release or transfer of Collateral
or any one or more Borrower or Obligor by the Lender, with or without
consideration, or of any extension, modification or renewal. No conduct of the
holder shall be deemed a waiver or release of such liability, unless the holder
expressly releases such party in writing. The Borrower shall pay to the holder
on demand all expenses, including reasonable attorneys' fees and expenses of
legal counsel, incurred by the holder in any way arising from or relating to the
enforcement or attempted enforcement of the Note and any related guaranty,
collateral document or other document and the collection or attempted
collection, whether by litigation or otherwise, of the Note. Time is of the
essence.

If Lowe's Companies, Inc., its successor or assigns, stops purchasing the
ceiling medallion product line from Prime/Home Impressions, LLC or if in
subsequent years Lowe's Companies, Inc. reduces by 50% or more the amount of
ceiling medallions purchased during the first year, then Prime/Home Impressions,
LLC will immediately notify Bank and Bank, at Bank's option, may accelerate the
sums due under the note and demand immediate payment.

Borrower acknowledges that Lender may reproduce (by electronic means or
otherwise) any of the documents evidencing and/or securing the Obligations and
thereafter may destroy the original documents. Borrower does hereby agree that
any document so reproduced shall be and remain the binding obligation of
Borrower, enforceable and admissible in evidence against it to the same extent
as if the original documents had not been destroyed.

This Note, and the rights and obligations of the parties hereunder, shall be
governed and construed in accordance with the laws of the State of North
Carolina, except to the extent that the Code provides for the application of
other law with respect to the Collateral.

IN WITNESS WHEREOF, the Borrower has executed this Note under seal the day and
year set forth above.


                                      Borrower:

Attest:                               Prime/Home Impressions, LLC

                                      By:     /s/ Robert W. Lackey        (SEAL)
-----------------------------            ---------------------------------------
                                              Robert W. Lackey, Sr.
Title:                                Title:  Group A. Manager
      -----------------------


                                      By:     /s/ Neall W. Humphrey       (SEAL)
-----------------------------            ---------------------------------------
                                              Neall W. Humphrey
Title:                                Title:  Group B Manager
      -----------------------







<PAGE>


                                   SCHEDULE 1


This Schedule is referenced on the Note and Security Agreement dated April 29,
2002 in the stated amount of $500,000.00 between Prime/Home Impressions, LLC as
Borrower and Wachovia Bank, N.A. as Lender and shall be considered a part
thereof to the same extent as if written therein.

The Note shall bear interest from the date hereof at a rate per annum equal to
the Monthly LIBOR Index plus Two Hundred Fifty (250) basis points.

     As used herein, the "Monthly LIBOR Index" shall mean a rate per annum equal
to LIBOR (determined, in accordance with the paragraph below), adjusted for all
applicable Costs (as hereinafter defined). The Monthly LIBOR index shall be
adjusted on the first day of each calendar month and shall be further adjusted
on and as of the effective date of changes in the Lender's Costs. As used
herein, "Costs" shall mean any charges, fees or costs incurred by the Lender as
the result of any changes in the laws, rules, regulations, or governmental
requirements pertaining to LIBOR loans.

     As used herein, "LIBOR" shall mean the rate per annum (rounded upward to
the next higher of 1/10,000 of 1%) for deposits of United States dollars with
maturities of one month, that appears on the display designated as page "3750"
of the Telerate Service (or such other page as may replace 3750 of that service
or such other service or services as may be designated by the British Bankers'
Association for the purpose of displaying London Interbank Offered Rate for U.
S. Dollar deposits), determined as of 11:00 a.m. London time, two (2) Business
Days prior to the first day of each calendar month.

     As used herein, "Business Day" shall mean a day on which dealings in United
States dollar deposits are being carried out in the London interbank eurodollar
market.

     Notwithstanding any provisions herein to the contrary, if the Lender should
at anytime be unable to determine LIBOR, then the Monthly LIBOR Index shall be
based on an interest rate selected by the Lender in good faith that approximates
one month LIBOR taking into account rates in relevant markets. Such rate shall
be in effect until the first day of the next calendar month on which LIBOR is
determinable.


<PAGE>
SECURITY AGREEMENT - COMMERCIAL

THIS SECURITY AGREEMENT - COMMERCIAL (this "Agreement") is made the 29th day of
April, 2002 between Prime/Home Impressions, LLC, a North Carolina limited
liability company having a principal address of 420 3rd Avenue NW, Hickory,
North Carolina 28601 ("Debtor"), and WACHOVIA BATIK, N.A., a national bank
having an address of 100 North Main Street, Winston-Salem, North Carolina 27150
("Secured Party").


This Agreement is entered into in conjunction with certain financial
accommodations provided by Secured Party to Debtor or to another party which are
or will be to the direct interest and advantage of Debtor, the receipt and
sufficiency of such value are hereby acknowledged, and with respect to all of
the following personal property of Debtor, wherever located, and now owned or
hereafter acquired, as defined, checked and filled in below (hereinafter
referred to as the "Collateral"):

check all boxes) that apply:

[X] ACCOUNTS. Each and every account, chattel paper, general intangible and
instrument, as those terms are defined in the UCC (as defined below), and all
other rights of Debtor to the payment of money of every nature, type and
description, whether now owing to Debtor or hereafter arising, and all monies
and other proceeds (cash or non-cash), including, without limitation, the
following: all accounts, accounts receivable, book debts, securities,
instruments and chattel paper, books of account and records of Debtor, deposit
account balances, notes, drafts, acceptances, rents, guest room receipts,
payments under leases or sales of Equipment or Inventory (as defined below) and
other forms of obligations now or hereafter received by or belonging or owing to
Debtor for goods sold or leased and/or services rendered by it, and all of
Debtor's rights in, to and under all purchase orders, instruments and other
documents now or hereafter received by it evidencing obligations for and
representing payment for goods sold or leased and/or services rendered, and all
monies due or to become due to Debtor under all contracts for the sale or lease
of goods and/or the performance of services by it, now in existence or hereafter
arising, including, without limitation, the right to receive the proceeds of
said purchase orders and contracts; all contracts, leases, instruments,
undertakings, documents or other agreements in or under which Debtor may now or
hereafter have any right, title or interest; all customer lists, tax refunds due
Debtor from any governmental agency; and any and all proceeds of any of the
above;

[X] INVENTORY. All "inventory," as such term is defined in the UCC, now owned or
hereafter acquired by Debtor, of every nature, type and description, wherever
located, including, without limitation, all of Debtor's goods or personal
property held for lease or sale or being processed for lease or sale, all raw
materials, work in progress, finished goods, packaging materials, goods held for
display or demonstration, goods on lease or consignment, returned and
repossessed goods and all other materials or supplies used or consumed or to be
used or consumed in Debtor's business or in the processing, packaging or
shipping of the same, excluding any toxic, hazardous or radioactive material or
any other material which may be disposed of lawfully only pursuant to a special
permit or at a government approved facility, all documents including, without
limitation, documents of title, warehouse receipts and bills of lading covering
all or any portion of such inventory, and all customer lists; and any and all
proceeds and products of any of the above;

[X] EQUIPMENT. All "equipment," as such term is defined in the UCC, now owned or
hereafter acquired or leased by Debtor, including, without limitation, any
equipment described on a schedule attached hereto, all tools and items of
machinery and equipment of any kind, nature and description whether affixed to
real property or not, as well as trucks and vehicles of every description,
trailers, handling and delivery equipment, furnishings, leasehold improvements,
fixtures and office furniture and all other tangible personal property of Debtor
of every nature, type and description, and any and all additions to,
substitutions for and replacements of or accessions to and property similar to
any of the foregoing, wherever located, together with all attachments,
components, parts (including spare parts), equipment and accessories installed
thereon or affixed thereto and all fuel for any thereof; and any and all
proceeds of any of the above;


<PAGE>

[X] GENERAL INTANGIBLES. All "general intangibles," as such term is defined in
the UCC, now owned or hereafter acquired by Debtor or in which Debtor now has or
hereafter acquires any right, title or interest, including, without limitation,
(a) all of Debtor's choses in action, suits, actions, causes of action and
claims of every kind and nature, whether at law or in equity, (b) all
condemnation awards and insurance proceeds, (c) all tax refunds, rights and
claims thereto and other payments from any local, state or federal government
authority or agency, (d) all contract rights, licenses, permits, zoning
approvals, rights, agreements and all other private or governmental documents of
every kind or character whatsoever and (e) all customer lists, servicing rights,
patents and patent rights (whether or not registered), licenses, permits,
certificated and uncertificated securities, investment property, trade marks,
service marks, trade names, logos, copyrights, computer programs and software,
goodwill; and any and all proceeds of any of the above;

[X]  INSTRUMENTS           [X]  DOCUMENTS          [X]  LETTER-OF-CREDIT RIGHTS

[X]  DEPOSIT ACCOUNTS      [X]  CHATTEL PAPER      [X]  INVESTMENT PROPERTY

[ ]  OTHER

and, to the extent not listed above as original collateral, proceeds and
products of all of the foregoing.

Any term used in the Uniform Commercial Code of the State of North Carolina (the
"UCC") and not defined in this Agreement has the meaning given such term as
defined in the UCC in effect on the date hereof or as it may be amended from
time to time.

1. OBLIGATIONS SECURED.

         The security interest hereby granted is to secure the payment to
Secured Party and the performance of all indebtedness, liabilities and
obligations of Debtor to Secured Party whatsoever, whether direct, indirect,
absolute or contingent, joint or several, as maker, endorser, guarantor, surety,
account party, swap counterparty or otherwise, including (i) all of Debtor's
present or future obligations to Secured Party, (ii) all amounts now or in the
future owed by Debtor to Secured Party, (iii) the repayment of (a) any amounts
that Secured Party may advance or spend for the maintenance or preservation of
the Collateral and (b) any other expenditures that Secured Party may make under
the provisions of this Agreement or for the benefit of Debtor, (iv) all amounts
owed under any modifications, extensions or renewals of any of the foregoing
obligations, (v) all sums arising under any ISDA Master Agreement now or
hereafter executed between Debtor and Secured Party and any related schedules
and confirmations thereto, and (vi) all costs, expenses and reasonable
attorneys' fees incurred by Secured Party in connection with the collection of
any of the foregoing or in the protection or enforcement of Secured Party's
rights or remedies hereunder (hereinafter collectively referred to as the
"Obligations"), provided, however, that the security interest hereby granted
shall not include (a) consumer credit as defined in Federal Reserve Board
Regulation Z and either subject to the disclosure requirements of Federal
Reserve Board Regulation Z or state consumer protection laws or (b) non-consumer
credit if under applicable state law the maximum interest rate for such credit
is reduced when secured.

2. GRANT OF SECURITY INTEREST.

         Debtor hereby grants a security interest in the Collateral to Secured
Party to secure the payment and performance of the Obligations.

3. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Secured
Party (which representations and warranties shall be deemed to be renewed as of
the date of each renewal or extension of credit under any Obligation) as
follows:


<PAGE>

(a) Debtor now owns and possesses (or will use the proceeds of the loan advances
secured hereby to become the owner and take possession of) the Collateral,
except where expressly otherwise provided by this Agreement or where Secured
Party chooses to perfect its security interest by possession in addition to the
filing of a financing statement. Where Collateral is in the possession of a
third party, Debtor will join with Secured Party in notifying the third party of
Secured Party's security interest and obtaining an acknowledgment from the third
party that it is holding the Collateral for the benefit of Secured Party.

(b) Debtor has rights in or the power to transfer the Collateral and its title
to the Collateral is free of all adverse claims, liens, security interests and
restrictions on transfer or pledge, except as created by this Agreement.

(c) Debtor will cooperate with Secured Party in obtaining control of Collateral
consisting of Deposit Accounts, Investment Property and Letter-of-credit rights.

(d) If Debtor is an individual, Debtor's (i) principal residence is located in
_______ and (ii) exact legal name is as set forth in the first paragraph of this
Agreement. If Debtor is an organization, Debtor's (i) chief executive office is
located in the the State of North Carolina; (ii) state of organization is the
the State of North Carolina; and (iii) exact legal name is as set forth in the
first paragraph of this Agreement.

(e) The following is a list of any and all names used by Debtor during all or
any part of the five year period preceding the date of this Agreement:_________.

(f) The following is a list of all business addresses used by Debtor during all
or part of any of the five (5) year period preceding the date of this
Agreement:__________________.

(g) The records relating to the Collateral will be located at the address set
forth in the first paragraph of this Agreement unless a different address is
hereby specified:____________.

(h) The Collateral will be located at the address set forth in the
first paragraph of this Agreement unless a different address is hereby
specified:________________-.

(i) All or a part of the Collateral is or will be attached to real estate
described as ____________ and its record owner is ____________ (if more than one
record owner, all must be shown). Notwithstanding the above, and regardless of
the manner of the affixation, the Collateral shall remain personal property and
will not become part of the real estate.

(j) No financing statement covering the Collateral or any proceeds thereof is on
file in any public office except those in favor of Secured Party.

(k) The Accounts hereby assigned are bona fide and correct in amount, and there
are no set-offs, counterclaims or defenses of any kind thereto, except as may
have been disclosed to Secured Party in writing.

(1) The Collateral is not and shall not be used for personal, family, household
or farming use.

(m) Debtor has delivered or will deliver to Secured Party all documents of title
evidencing Inventory, including, but not limited to, bills of lading, dock
warrants, dock receipts and warehouse receipts.

4. COVENANTS. Until the Obligations are paid and/or performed in full and
Secured Party is no longer obligated to extend additional extensions of credit
or financial accommodations on the Obligations, Debtor agrees:

(a) To promptly pay, without offset or deduction, any amount due under any
Obligation, whether principal, interest, late charges or otherwise, even if the
Collateral is lost, damaged, or destroyed. To the extent Debtor uses the
proceeds of any credit secured hereby to purchase Collateral, Debtor's repayment
of the Obligations shall apply on a "first-in-first-out" basis so that the
portion of the Obligations used to purchase a particular item of Collateral
shall be paid in the chronological order the Debtor purchased the Collateral.

(b) To pay when due all taxes, licenses, repair bills and other assessments and
public or private charges and to forward to Secured Party upon request evidence
of such payments.

(c) To maintain insurance on the Collateral in amounts at
least equal to the fair market value of the Collateral and against casualty,
public liability and property damage risks and such other risks as Secured Party
may request. All insurance shall be with reputable companies with a Best
Insurance Report Rating of B+ or better, and Debtor or will pay all premiums for
insurance when due. Unless and until requested by Secured Party, Debtor shall
not be required to name Secured Party as additional insured in such policy or to
provide Secured Party a copy of the policy for or certificate evidencing such
insurance, but when and if requested by Secured Party, Debtor shall immediately
(but no later than five (5) calendar days) (i) cause all policies of such
insurance to specify that Secured Party is an additional insured as its
interests may appear and to provide that such insurance shall not be cancellable
by Debtor or the insurer without at least thirty (30) days' advance written
notice to Secured Party and


<PAGE>

that proceeds are payable to Secured Party regardless of any act or omission of
Debtor which would otherwise result in a denial of a claim; and (ii) deliver all
policies or certificates thereof (with copies of such policies) to Secured
Party. In the event any or all insurance hereinbefore provided for is cancelled,
any returned premium thereon may be collected by Secured Party and applied by
Secured Party to any part of the Obligations, whether matured or unmatured.


(d) To keep and maintain, at Debtor's own expense, satisfactory, complete and
current records of the Collateral, including, but not limited to, a record of
all shipments received, deliveries made, payments received, credits granted
thereon and other dealings therewith; and to furnish such reports on Debtor and
the Collateral to Secured Party as Secured Party may request from time to time.

(e) To keep the Collateral in good order and repair, at Debtor's expense. Debtor
will not violate any federal, state or local law or regulation, including,
without limitation, environmental laws and regulations, in the use, operation,
manufacture or storage of the Collateral.

(f) To execute and deliver on demand such further assurances and to take such
steps as may be necessary to perfect and maintain Secured Party's security
interest in the Collateral (including, but not limited to, obtaining
certificates of title showing Secured Party's lien and executing assignments and
financing and continuation statements) and to preserve the priority of Secured
Party's security interest and lien on the Collateral. Debtor will reimburse
Secured Party for all expenses incurred in the filing of financing statements,
obtaining such documents and perfecting its security interest in the Collateral.

(g) To pay promptly upon demand Secured Party's costs and expenses, including
reasonable attorneys' fees, in connection with any litigation, claim, action or
proceeding that may arise in connection with the collection, enforcement or
protection of the Obligations or the Collateral.

(h) Not to: (i) make any sales or leases of the any of the Collateral, (ii)
license any of the Collateral, (iii) grant any other security interest in any of
the Collateral, (iv) permit any liens or security interests to attach to any of
the Collateral except those created by this Agreement, (v) permit any of the
Collateral to be levied upon or seized under any legal process, (vi) do or
permit anything to be done that may impair the security intended to be afforded
by this Agreement.

(i) Not to change the location of the Collateral or cause such Collateral to be
moved, maintained or stored in any other location without giving Secured Party
at least thirty (30) days' prior written notice, and Debtor will not move the
Collateral from the state without prior written consent of Secured Party.

(j) To obtain, upon Secured Party's request, a waiver or disclaimer in favor of
Secured Party and in a form satisfactory to Secured Party, signed by all persons
owning or having an interest in real estate upon which all or part of the
Collateral is or will be attached or used.

(k) To furnish Secured Party from time to time, upon request, with Debtor's then
current financial statement in form and detail satisfactory to Secured Party, as
well as such other financial information as Secured Party may request from time
to time.

(l) To maintain its existence in good standing as may be from time to time
required by applicable law. Debtor will not merge, consolidate or chance
control, without prior written approval of Secured Party. Debtor shall not
change its name, change its principal residence, change its chief executive
office, change its status to an organization, change its state of organization,
change its type of organization, or change its organizational identification
number, as applicable, without giving Secured Party at least thirty (30) days'
written notice. At the request of Secured Party, Debtor will qualify to do
business and obtain all requisite licenses and permits in each state in which
such qualification may be necessary in order to maintain any action to collect
any Account.

(m) To permit Secured Party or its agent to enter upon Debtor's premises at any
time and without hindrance or delay to inspect the Collateral and to inspect,
audit, copy and make extracts from the books, records, journals, orders,
receipts, correspondence, computer storage media or data related or pertaining
thereto; and for the further security of Secured Party, it is agreed that
Secured Party has a special property interest in all books and records of Debtor
pertaining to Accounts. Secured Party shall also have the right at any time to
make direct verification with any account debtors as concerns the Collateral.
Debtor shall, at its own expense and cost, deliver any such books, account
ledgers and records to Secured Party or any designated agent of Secured Party at
any time upon request.

(n) To notify Secured Party immediately in the event that any Inventory
purchased by or to be delivered to Debtor shall be evidenced by a bill of
lading, dock warrant, dock receipt, warehouse receipt or other document of
title, and to deliver such document to Secured Party upon request. Debtor also
agrees to deliver to Secured Party on demand



<PAGE>

all Collateral of which Secured Party is required to take possession in order to
perfect its security interest therein, promptly upon the acquisition by Debtor
of any interest in such Collateral after the date hereof.

(o) Not to compromise, modify or discount any Account, except for ordinary trade
discounts or allowances for prompt payment, without the prior written consent of
Secured Party.

(p) If any of the Accounts are or should become evidenced by promissory notes,
trade acceptances or other instruments, to immediately notify Secured Party and
upon request by Secured Party to deliver the same to Secured Party appropriately
endorsed or assigned with recourse to Secured Party's order, and regardless of
the form of such endorsement or assignment, Debtor hereby waives presentment,
demand, notice of dishonor, protest and notice of protest and all other notices
with respect thereto.

(q) Secured Party hereby authorizes Debtor to collect the Accounts, but
Secured Party may, without cause or notice, curtail or terminate this authority
at any time. Upon notice by Secured Party to Debtor, Debtor shall forthwith,
upon receipt of all checks, drafts, cash and other remittances in payment of or
on account of the Accounts, deposit the same in one or more special accounts
maintained with Secured Party, over which Secured Party alone shall have the
power of withdrawal. The remittance of the proceeds of such Accounts shall not,
however, constitute payment or liquidation of such Accounts until Secured Party
shall receive good funds for such proceeds. Funds placed in such special
accounts shall be held by Secured Party as security for the Obligations. These
proceeds shall be deposited in precisely the form received, except for the
endorsement of Debtor where necessary to permit collection of items, which
endorsement Debtor agrees to make, and which endorsement Secured Party is also
hereby authorized to make on behalf of Debtor. In the event Secured Party has
notified Debtor to make deposits to a special account, pending such deposit,
Debtor agrees that it will not commingle any such checks, drafts, cash or other
remittances with any funds or other property of Debtor but will hold them
separate and apart therefrom, and upon an express trust for Secured Party until
deposit thereof is made in the special account. Secured Party will from time to
time apply the whole or any part of collateral funds on deposit in this special
account against such Obligations secured hereby as Secured Party may in its
discretion elect. At the sole election of Secured Party, any portion of said
funds on deposit in the special account which Secured Party shall elect not to
apply to such Obligations, shall be paid over by Secured Party to Debtor.
Secured Party, or its agents, shall have the right at any time, whether or not
an Event of Default (as defined below) shall have occurred (i) to notify any and
all account debtors to make payment directly to Secured Party and otherwise to
notify the account debtors of this assignment, (ii) to ask for, demand, collect,
institute and maintain suits for, receive, compound, compromise and give
acquittances for any and all sums owing, which are now or may hereafter become
due upon said Accounts, and to enforce payment thereof either in its own name or
in Debtor's name, (iii) to endorse the name of Debtor on checks, drafts or other
items tendered or received in payment of said Accounts and (iv) to enter upon
the premises of Debtor at any time for the purpose of reducing to possession the
Collateral (including chattel paper) and all cash or non-cash proceeds thereof.

(r) Secured Party shall have the right at any time to apply the net proceeds of
the Accounts whether or not an Event of Default shall have occurred under this
Agreement, and the net proceeds of the sale or other disposition of any other
Collateral upon the occurrence of an Event of Default under this Agreement, and
any other proceeds arising under this Agreement, first, to any Obligation owed
Secured Party under this Agreement and then the balance, if any, to other
indebtedness of Debtor owed to Secured Party.

(s) If Debtor fails to perform any of Debtor's duties and obligations under this
Agreement, Secured Party may, at its option, but without obligation, perform
such duty or obligation and any cost, fees and expenses incurred by Secured
Party in connection therewith shall be payable by Debtor on Secured Party's
demand for same and until paid shall bear interest at the highest rate permitted
by law. In connection therewith, Debtor hereby irrevocably designates, appoints
and empowers Secured Party, at Debtor's cost and expense, to do in the name of
Debtor any and all actions which Secured Party may deem necessary or advisable
to carry out the terms hereof upon the failure, refusal or inability of Debtor
to do so and Debtor hereby agrees to indemnify and hold Secured Party harmless
from any cost, damage, expense or liability arising against or incurred by
Secured Party in connection therewith.

5. EVENTS OF DEFAULT. Any one of the following events will constitute an "Event
of Default" under this Agreement:


<PAGE>

(a) If any payment on any Obligation or hereunder is not paid when due, or if
any payment of any other present or future debt, liability or obligation of
Debtor, or any endorser, surety or guarantor of any Obligation (Debtor, or any
endorser, surety or guarantor of any Obligation may be referred to generally as
a "Party") to Secured Party is not paid when due.

(b) If any Party defaults under or breaches any covenant or provision of an
Obligation or defaults under or breaches any covenant or provision of this
Agreement or any other instrument or agreement delivered to Secured Party in
connection with this Agreement or any other transaction or agreement with
Secured Party; or if any Party makes a materially false or misleading statement
to Secured Party.

(c) If any Collateral is lost, stolen, abandoned, destroyed, severely damaged,
involved in a legal proceeding, sold, encumbered or transferred except as
permitted by prior agreement with Secured Party.

(d) If any Party dissolves, merges, consolidates, changes control or ceases to
be a going concern, or changes its name or state of organization or chief
executive office or type or organization (if an organization), or its place of
residence (if an individual), or changes from an individual to an organization
without giving Secured Party at least thirty (30) days' written notice.

(e) If a petition or complaint in bankruptcy, for arrangement or reorganization
or for relief under any insolvency law is fled by or against any Party, or if
any Party admits an inability to pay such Party's debts as they mature.


(f) If any property of any Party is seized, attached or levied on, or if a
receiver or custodian is appointed for any Party.

(g) If Secured Party in good faith believes that (i) the prospect of payment or
performance is impaired, (ii) any Collateral is insecure or (iii) a material
adverse change has occurred in any Party's financial condition.

(h) If any guaranty obtained in connection with an Obligation is terminated.

(i) If there shall occur a default under any lien or security interest affecting
the Collateral, either superior or inferior to the security interests created by
this Agreement.

6. REMEDIES. Upon the occurrence of an Event of Default, and in addition to any
other rights or remedies provided by law or by contract or accorded to a secured
party under the UCC, Secured Party may, without prior notice (unless otherwise
provided below), exercise any of the following rights or remedies:

(a) Secured Party may refuse any further request for advances to Debtor and/or
may declare all sums due under any of the Obligations immediately due and
payable. If a note constituting any of the Obligations shall be a demand
instrument, however, the recitation of the right of Secured Party to declare any
and all of the Obligations to be immediately due and payable or the recitation
of Events of Default shall not constitute an election by Secured Party to waive
its right to demand payment under a demand at any time and in any event as
Secured Party in its sole discretion may deem appropriate.

(b) Upon the occurrence of any Event of Default, Secured Party may take
possession of the Collateral and exercise its rights hereunder without giving
Debtor any opportunity for hearing to be held before Secured Party (whether
through judicial process or otherwise) seizes, liquidates or disposes of the
Collateral. DEBTOR DOES HEREBY EXPRESSLY AND VOLUNTARILY WAIVE ALL RIGHTS THAT
DEBTOR HAS OR MAY HAVE AS TO A NOTICE AND TO A JUDICIAL HEARING PRIOR TO SEIZURE
OF THE COLLATERAL BY SECURED PARTY. Secured Party may require and Debtor agrees
upon demand to assemble the Collateral and make it available to Secured Party at
a place to be designated by Secured Party that is reasonably convenient to both
parties, and/or Secured Party may enter any premises and take possession of the
Collateral or any part thereof. Unless the Collateral is perishable or threatens
to decline speedily in value or is of type customarily sold on a recognized
market, Secured Party will give Debtor reasonable notice of time and place of
any public sale thereof or the time after which any private sale or any other
intended disposition thereof is to be made. The requirement of reasonable notice
shall be met if notice is mailed, postage prepaid to Debtor at its above
mentioned address, at least ten (10) days before the time of sale or disposition
of the Collateral. Secured Party may apply cash proceeds from a sale or
disposition first to the expenses of such sale or disposition or other
enforcement measures, including reasonable attorneys' fees and legal expenses,
and then to the Obligations in such order as to principal or interest as Secured
Party may desire. Debtor will remain liable for and will pay to Secured Party
any deficiency remaining after such application of proceeds. Secured Party may
(i) comply with any applicable state or federal law requirements in connection
with a disposition of the Collateral, (ii) sell the Collateral without giving
any warranties as to the Collateral, and (iii) specifically disclaim any
warranties of title or the like and in so doing any


<PAGE>

of the foregoing will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.

(c) Secured Party may appropriate, set off and apply for the payment of any or
all of the Obligations, any and all balances, sums, property, claims, credits,
deposits, accounts, reserves, collections, drafts, notes or other items or
proceeds of the Collateral in or coming into the possession of Secured Party or
its agents and belonging or owing to Debtor, without notice to Debtor and in
such manner as Secured Party may in its discretion determine.

(d) All payments received by Debtor under or in connection with any of the
Collateral shall be segregated from other funds of Debtor, held in trust for
Secured Party and promptly upon receipt turned over to Secured Party, duly
endorsed to Secured Party, if required. Secured Party shall hold such payments
as collateral security and apply them to the Obligations in such order as
Secured Party may elect. Any balance of such payments remaining after payment in
full of the Obligations shall be paid to Debtor or to whomever is lawfully
entitled to receive such payments.

(e) Debtor shall pay to Secured Party, on demand, any and all costs and
expenses, including all reasonable attorneys' fees, incurred or paid by Secured
Party in protecting or enforcing its rights, powers and remedies hereunder or
under any other agreement with any Party or any Obligation secured hereby or
thereby or in any way connected with any proceeding or action, judicial or
otherwise, by whomsoever initiated concerning the protection or enforcement
thereof.

(f) All rights and remedies of Secured Party under any law, under this Agreement
or under any agreement given in connection with this Agreement shall be
cumulative and not exclusive and may be exercised successively or concurrently.

7. MISCELLANEOUS.

(a) Debtor agrees to execute and/or authorizes Secured Party to file one or more
financing statements describing the Collateral. The financing statements may
contain a generic collateral description that is broader that the Collateral.
Debtor further authorizes Secured Party to file one or more financing statements
describing any agricultural liens or other statutory liens held by Secured
Party.

(b) No lawful act of commission or omission upon the part of Secured Party, or
any delay in exercising its rights hereunder, shall in any way or at any time
affect, impair or waive the rights of Secured Party to enforce any right, power
or benefit hereunder. The provisions of this Agreement may be amended only by
the written agreement of Secured Party and Debtor.

(c) Debtor hereby waives presentment, notice of dishonor and protest of all
instruments relating to the Obligations or the Collateral and any notices and
demands (except as expressly provided herein) whether or not relating to such
instruments.

(d) Any notice or demand given hereunder shall be deemed to have been
sufficiently given or served for all purposes by being deposited in the mail,
postage prepaid, or transmitted by any other usual means of communication with
postage or cost of transmission provided for, to Debtor and/or Secured Party at
the addresses for each as mentioned above, but nothing herein shall be construed
to invalidate any other form of communication actually received by the party to
whom the same is directed.

(e) Upon the payment in full of all Obligations, Secured Party shall have no
duty to release the Collateral nor to release Debtor from any duty or obligation
hereunder unless a period of 95 days, beginning with the date of the last
payment made by any Party who shall be so obligated or shall elect to pay, as
the case may be, shall elapse during which period no petition in bankruptcy
shall be filed by or against any Party. In the event any Obligation secured
hereby is paid by Debtor, or any maker, endorser or guarantor of the Obligations
and because of bankruptcy or other law relating to creditor's rights, such
payment is deemed to constitute a preference, Debtor agrees to remain liable
hereunder if Secured Party is compelled to repay any such Obligation or any part
thereof to any trustee, receiver, custodian or otherwise.

(f) This Agreement shall bind and inure to the benefit of the heirs, legatees,
executors, administrators and assigns of Secured Party and shall bind all
persons who become bound as a debtor to this security agreement. Nothing herein
shall authorize Debtor to assign this Agreement or its rights in and to the
Collateral.

(g) Debtor shall protect, indemnify and save harmless Secured Party from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable


<PAGE>

attorneys' fees and expenses) imposed upon, incurred by, or asserted against,
Secured Party on account of (i) any failure or alleged failure of Debtor to
comply with any of the terms or representations in this Agreement, (ii) any
claim or loss or damage to the Collateral or any injury or claim of injury to,
or death of, any person or property that may be occasioned by any cause
whatsoever pertaining to the Collateral or the use, occupancy or operation
thereof or (iii) any failure or alleged failure of Debtor to comply with any
law, rule or regulation regarding the use, occupancy or operation of the
Collateral, provided that such indemnity shall be effective only to the extent
of any loss, cost or damage that may be sustained by Secured Party in excess of
any net proceeds received by it from any insurance (other than self insurance)
carried with respect to such loss. Nothing contained herein shall require Debtor
to indemnify Secured Party for any claim or liability resulting from its gross
negligence or its willful and wrongful acts. The covenants in this Paragraph
shall survive payment of the Obligations. The indemnity provided for herein
shall extend to the officers, directors, employees and duly authorized agents of
Secured Party.

(h) Nothing in this Agreement shall be construed to impose any obligation upon
Secured Party to expend funds or to extend or continue any credit whatsoever to
Debtor or Obligor or to take any other discretionary act herein permitted,
except to the extent that Secured Party may from time to time obligate itself to
do so in writing, and Secured Party shall have no liability or obligation for
any delay or failure to take any discretionary act.

(i) If any Obligation secured hereby concerns a guarantor or other indirect or
contingent obligation related to another party, Debtor represents to Secured
Party that Secured Party will have no duty or obligation to investigate such
party's financial affairs for the benefit of Debtor or to advise Debtor of any
fact respecting, or of any change in, such other party's financial condition or
affairs which might come to Secured Party's attention.

(j) The rights, powers, and remedies of Secured Party under this Agreement shall
be in addition to all rights, powers and remedies given to Secured Party by
virtue of statute, rule of law, any documents executed in conjunction with any
agreement or instrument evidencing or securing the Obligations or any other
agreement, all of which rights, powers and remedies shall be cumulative and may
be exercised successively or concurrently without impairing Secured Party's
security interest in the Collateral. (k) This Agreement shall be governed by the
laws of the State of North Carolina except to the extent that the UCC provides
for the application of other law with respect to the Collateral.

IN WITNESS WHEREOF, Debtor has caused this Agreement to be signed under seal as
of the day and year first above written.

                                    Prime/Home Impressions, LLC


                                           /s/ Robert W. Lackey, Sr.      (SEAL)
                                    --------------------------------------
                                    By:    Robert W. Lackey, Sr.
                                    Title: Group A Manager


                                           /s/ Neall W. Humphrey          (SEAL)
                                    --------------------------------------
                                    By:    Neall W. Humphrey
                                    Title: Group B Manager

<PAGE>
GUARANTY AGREEMENT


WHEREAS. the undersigned has requested Wachovia Bank, N.A. (herein the "Lender")
to extend credit or make certain financial accommodations to Prime/Home
Impressions. LLC (herein called the "Borrower") or to renew or extend, in whole
or in part, existing indebtedness or financial accommodations of the Borrower to
the Lender, and the Lender has extended credit or extended or renewed existing
indebtedness or made financial accommodations and/or may in the future extend
credit or extend or renew existing indebtedness or make certain financial
accommodations by reason of such request and in reliance upon this guaranty;

NOW, THEREFORE, in consideration of such credit extended or renewed and/or to be
extended or renewed or such financial accommodations made or to be made in its
discretion by the Lender to the Borrower (whether to the same, greater or lesser
extent than any limit, if applicable, of this guaranty), in consideration of One
Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the undersigned hereby unconditionally
guarantees to the Lender and its successors, endorsees, transferees and assigns,
the punctual payment when due, whether by acceleration or otherwise, and at all
times thereafter of (a) all debts, liabilities and obligations whatsoever of the
Borrower to the Lender, now existing or hereafter coming into existence, whether
joint or several, whether created directly or acquired by endorsement,
assignment or otherwise, whether absolute or contingent, secured or unsecured,
due or not due, including but not being limited to notes, checks, drafts,
credits, advances, obligations to reimburse draws against letters of credit, and
all sums arising under any ISDA Master Agreement now or hereafter executed
between the Borrower and the Lender and any related schedules and confirmations
thereto; (b) accrued but unpaid interest on such debts, liabilities and
obligations, whether accruing before or after any maturity(ies) thereof; and (c)
all expenses, including reasonable attorneys' fees and expenses of legal counsel
incurred by Lender if any such debts, liabilities or obligations of the Borrower
are collected, or the liability of the undersigned hereunder enforced, by or
through any attorney at law (all of (a), (b) and (c) being hereinafter referred
to as the "Obligations"). References herein to Borrower shall be deemed to
include any successor corporations to Borrower, if Borrower is a corporation, or
any reconstituted partnerships of Borrower, if Borrower is a partnership.

The undersigned consents that, at any time, and from time to time, either with
or without consideration, the whole or any part of any security now or hereafter
held for any Obligations may be substituted, exchanged, compromised, impaired,
released, or surrendered with or without consideration; the time or place of
payment of any Obligations or of any security thereof may be changed or
extended, in whole or in part, to a time certain or otherwise, and may be
renewed or accelerated, in whole or in part; the Borrower may be granted
indulgences generally; any of the provisions of any note or other instrument
evidencing any Obligations or any security therefor may be modified or waived;
any party liable for the payment thereof (including but not being limited to any
co-guarantor) may be granted indulgences or released; neither the death,
termination of existence, bankruptcy, incapacity, lack of authority nor
disability of the Borrower or any one or more of the guarantors, including any
of the undersigned, shall affect the continuing obligation of any other
guarantor, including any of the undersigned, and that no claim need be asserted
against the personal representative, guardian,







                                       1






<PAGE>

custodian, trustee or debtor in bankruptcy or receiver of any deceased,
incompetent, bankrupt or insolvent guarantor; any deposit balance to the credit
of the Borrower or any other party liable for the payment of the Obligations or
liable upon any security therefor may be released, in whole or in part, at,
before and/or after the stated, extended or accelerated maturity of any
Obligations; and the Lender may release, discharge, compromise or enter into any
accord and satisfaction with respect to any collateral for the Obligations, or
the liability of the Borrower or any of the undersigned, or any liability of any
other person primarily or secondarily liable on any of the Obligations, all
without notice to or further assent by the undersigned, who shall remain bound
hereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence, release, discharge or accord
and satisfaction.

Without limiting any of the foregoing, in the event of incompetency, or
dissolution of the Borrower, or should the Borrower become insolvent (as defined
by the Uniform Commercial Code (as the same may be amended from time to time,
(the "Code")) in effect for the State of North Carolina (hereinafter referred to
as the "Governing Jurisdiction"), or if a petition in bankruptcy be filed by or
against the Borrower, or if a receiver be appointed for any part of the property
or assets of the Borrower, or if any final judgment for money damages be entered
against the Borrower in a court of competent jurisdiction and remain unsatisfied
for a period of thirty (30) days or more, or if the Lender shall deem itself
insecure with respect to the Obligations and whether or not such event occurs at
a time when any of such Obligations are otherwise due and payable, the
undersigned agrees to pay to the Lender upon demand the full amount which would
be payable hereunder by the undersigned if all such Obligations were then due
and payable.

The undersigned expressly waives: (a) notice of acceptance of this guaranty and
of all extensions or renewals of credit or other financial accommodations to the
Borrower; (b) presentment and demand for payment of any of the Obligations; (c)
protest and notice of dishonor or of default to the undersigned or to any other
party with respect to any of the Obligations or with respect to any security
therefor; (d) any invalidity or disability in whole or in part at the time of
the acceptance of, or at any time with respect to, any security for the
Obligations or with respect to any party primarily or secondarily liable for the
payment of the Obligations to the Lender; (e) the fact that any security for the
Obligations may at any time or from time to time be in default or be
inaccurately estimated or may deteriorate in value for any cause whatsoever; (f)
any diligence in the creation or perfection of a security interest or collection
or protection of or realization upon the Obligations or any security therefor,
any liability hereunder, or any party primarily or secondarily liable for the
Obligations or any lack of commercial reasonableness in dealing with any
security for the Obligations; (g) any duty or obligation on the part of the
Lender to ascertain the extent or nature of any security for the Obligations, or
any insurance or other rights respecting such security, or the liability of any
party primarily or secondarily liable for the Obligations, or to take any steps
or action to safeguard, protect, handle, obtain or convey information
respecting, or otherwise follow in any manner, any such security, insurance or
other rights; (h) any duty or obligation on the Lender to proceed to collect the
Obligations from, or to commence an action against, the Borrower, any other
guarantor, or any other person, or to resort to any security or to any balance
of any deposit account or credit on the books of the Lender in favor of the
Borrower or any other person, despite any notice or request of the undersigned
to do so; (i) to the fullest extent not







                                       2


<PAGE>

prohibited by law, the right to receive notification of disposition of any
collateral granted by Borrower, the undersigned, or any other person as security
for any of the Obligations; (j) to the extent not prohibited by law, the right
to assert any of the. benefits under any statute providing appraisal or other
rights which may reduce or prohibit any deficiency judgments in any foreclosure
or other action; (k) all other notices to which the undersigned might otherwise
be entitled; (l) demand for payment under this guaranty; (m) any rights of the
undersigned pursuant to North Carolina General Statutes Section 26-7 or any
similar or subsequent law.

This is a guaranty of payment and not of collection. The liability of the
undersigned on this guaranty shall be continuing, direct and immediate and not
conditional or contingent upon either the pursuit of any remedies against the
Borrower or any other person or foreclosure of any security interests or liens
available to the Lender, its successors, endorsees or assigns. The Lender may
accept any payment(s), plan for adjustment of debts, plan for reorganization or
liquidation, or plan of composition or extension proposed by, or on behalf of,
the Borrower or any other guarantor without in any way affecting or discharging
the liability of the undersigned hereunder. If the Obligations are partially
paid, the undersigned shall remain liable for any balance of such Obligations.
This guaranty shall be revived and reinstated in the event that any payment
received by Lender on any Obligation is required to be repaid or rescinded under
present or future federal or state law or regulation relating to bankruptcy,
insolvency or other relief of debtors. The undersigned agrees to furnish
promptly to the Lender annual financial statements and such other current
financial information as the Lender may reasonably request from time to time.

The undersigned expressly represents and acknowledges that loans and other
financial accommodations by the Lender to the Borrower are and will be to the
direct interest and advantage of the undersigned.

The Lender may, without notice of any kind, sell, assign or transfer all or any
of the Obligations, and in such event each and every immediate and successive
assignee, transferee, or holder of all or any of the Obligations shall have the
right to enforce this guaranty, by suit or otherwise, for the benefit of such
assignee, transferee or holder, as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, powers and benefits,
but the Lender shall have an unimpaired right, prior and superior to that of any
such assignee, transferee or holder, to enforce this guaranty for the benefit of
the Lender, as to so much of the Obligations as it has not sold, assigned or
transferred.

No delay or failure on the part of the Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Lender of any right or remedy shall preclude other or further exercise of
any other right or remedy.

For the purpose of this guaranty, the Obligations shall include all debts,
liabilities and obligations of the Borrower to the Lender, notwithstanding any
right or power of the Borrower or anyone else to assert any claim or defense as
to the invalidity or unenforceability thereof, and no such claim or defense
shall impair or affect the obligations and liabilities of the undersigned
hereunder. Without limiting the generality of the foregoing, if the Borrower is
a corporation, partnership, joint venture, trust or other form of business
organization, this






                                       3

<PAGE>

guaranty covers all Obligations purporting to be made in behalf of such
organization by any officer or agent of the same, without regard to the actual
authority of such officer or agent. The term "corporation" shall include
associations of all kinds and all purported corporations, whether or not
correctly and legally chartered and organized.

To the extent not prohibited by law, the undersigned hereby grants to the Lender
a security interest in and security title to and hereby assigns, pledges,
transfers and conveys to Lender (i) all property of the undersigned now or
hereafter in the possession or control of the Lender (exclusive of any such
property in the possession or control of the Lender as a fiduciary other than as
agent), including, without limitation, all cash, stock or other dividends and
all proceeds thereof, and all rights to subscribe for securities incident
thereto and any substitutions or replacements therefor and (ii) any of the
undersigned's deposit accounts (as such term is defined in the Uniform
Commercial Code of the State of North Carolina, as the same may be amended from
time to time) held by Lender, whether such accounts be general or special, or
individual or multiple party, and upon all drafts, notes, or other items
deposited for collection or presented for payment by the undersigned with the
Lender, exclusive of any such property in the possession or control of the
Lender as a fiduciary other than as agent, and the Lender may at any time,
without demand or notice, appropriate and apply any of such to the payment of
any of the Obligations, whether or not due, except for other indebtedness,
obligations and liabilities owing to Lender that constitute (a) consumer credit
as defined in Federal Reserve Board Regulation Z and is either subject to the
disclosure requirements of Federal Reserve Board Regulation Z or state consumer
protection laws or (b) non-consumer credit if under applicable state law the
maximum interest rate for such credit is reduced when secured.

Any amount received by the Lender from whatever source and applied by it toward
the payment of the Obligations shall be applied in such order of application as
the Lender may from time to time elect.

This guaranty shall bind and inure to the benefit of the Lender, its successors
and assigns, and likewise shall bind and inure to the benefit of the
undersigned, their heirs, executors, administrators, successors and assigns. If
more than one person shall execute this guaranty or a similar, contemporaneous
guaranty, the term "undersigned," shall mean, as used herein, all parties
executing this guaranty and such similar guaranties and all such parties shall
be liable, jointly and severally, one with the other and with the Borrower, for
each of the undertakings, agreements, obligations, covenants and liabilities
provided for herein with respect to the undersigned. This guaranty contains the
entire agreement and there is no understanding that any other person shall
execute this or a similar guaranty. Furthermore, no course of dealing between
the parties, no usage of trade, and no parol or extrinsic evidence shall be used
to supplement or modify any terms of this guaranty; nor are there any conditions
to the complete effectiveness of this guaranty.

This guaranty shall be deemed accepted by Lender in the Governing Jurisdiction.
The parties agree that this guaranty shall be deemed, made, delivered, performed
and accepted by Lender in the Governing Jurisdiction and shall be governed by
the laws of the Governing Jurisdiction. Wherever possible each provision of this
guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provisions of this guaranty shall be







                                       4

<PAGE>

prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this guaranty.

The undersigned (a) submits to personal jurisdiction in the Governing
Jurisdiction, the courts thereof and any United States District Court sitting
therein, for the enforcement of this guaranty, (b) waives any and all personal
rights under the law of any jurisdiction to object on any basis (including,
without limitation, inconvenience of forum) to jurisdiction or venue within the
Governing Jurisdiction, for the purpose of litigation to enforce this guaranty,
and (c) agrees that service of process may be made upon the undersigned by first
class postage prepaid mail, addressed to the undersigned at the latest address
of the undersigned known to the Lender (or at such other address as the
undersigned may specify for the purpose by notice to the Lender). Nothing herein
contained, however, shall prevent the Lender from bringing any action or
exercising any rights against any security and against the Borrower personally,
and against any assets of the Borrower, within any other state or jurisdiction.

Guarantor acknowledges that Lender may reproduce (by electronic means or
otherwise) any of the documents evidencing and/or securing the Obligations and
thereafter may destroy the original documents. Guarantor does hereby agree that
any document so reproduced shall be and remain the binding obligation of
Guarantor, enforceable and admissible in evidence against it to the same extent
as if the original documents had not been destroyed.

This guaranty shall remain in full force and effect as to each of the
undersigned unless and until terminated as to one or more of the undersigned by
notice to that effect actually received by the Lender, by registered mail,
addressed to Lender at 100 North Main Street, Winston-Salem, North Carolina
27101, but no such notice shall affect or impair the liabilities hereunder of
such of the undersigned who gives or on whose behalf is given any such notice
for the Obligations existing at the date of receipt by the Lender of such
notice, any renewals, modifications, or extensions thereof (whether made before
or after such notice is received), any interest thereon, or any costs or
expenses, including without limitation, attorneys' fees incurred in the
collection thereof or any future advances made by Lender to Borrower as required
or permitted pursuant to the terms of the instruments, documents or agreements
evidencing or providing for the Obligations. Any such notice of termination by
or on behalf of any of the undersigned shall affect only that person and shall
not affect or impair the liabilities and obligations hereunder of any other
person.

The undersigned hereby expressly waives, for Lender's benefit and the benefit of
the Borrower and any other guarantor, maker or endorser of the Obligations, any
and all claims or actions against the Borrower, any other guarantor, maker or
endorser of the Obligations and any and all rights of recourse against any
property or assets of the Borrower, any other guarantor, maker or endorser of
the Obligations (including without limitation any security for the Obligations)
arising out of or related to any payment made by the undersigned under this
guaranty, including, without limitation, any claim of the undersigned for
subrogation, reimbursement, exoneration, contribution or indemnity that the
undersigned may have against the Borrower, any other guarantor, maker or
endorser of the Obligations and any benefit of, and any other right to
participate in, any security for the Obligations or any guaranty of the







                                       5

<PAGE>

Obligations now or hereafter held by Lender. The waiver contained in this
paragraph shall continue and survive after the termination of this guaranty and
the payment of the Obligations.

The terms and provisions of any addendum attached hereto are incorporated herein
by reference and made a part hereof.

IN WITNESS WHEREOF, each of the undersigned has executed this guaranty under
seal this 29th day of April, 2002.


                                      TRADE SOURCE INTERNATIONAL, INC.



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







                                       6




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