Item 1.01 Entry into a Material Definitive Agreement.
On July 10, 2009, Craftmade International, Inc. ("Craftmade"), together with
certain of Craftmade's direct or indirect subsidiaries (the "Borrowers"),
entered into a Loan and Security Agreement (the "Revolving Loan Agreement") with
Bank of America, N.A. ("Bank of America"). The Revolving Loan Agreement provides
for revolving loans in an aggregate amount up to $40,000,000 and is secured by
substantially all of the Borrowers' assets, excluding its current real estate
holdings. On July 10, 2009, Woodard-CM, LLC ("Woodard"), a wholly-owned
subsidiary of Craftmade, entered into a Term Loan Agreement (the "Term Loan
Agreement") with The Frost National Bank, San Antonio, Texas ("Frost"), in
conjunction with executing a Term Loan Note ("the Frost Note"), in the principal
amount of $3,500,000, payable to Frost, secured by Woodard's primary
manufacturing and distribution facility located in Owosso, Michigan (the
"Michigan Facility"). In aggregate the proceeds from the Revolving Loan
Agreement and the Term Loan Agreement (together the "Loan Agreements"), were
used to pay off amounts owed under the Third Amended and Restated Loan Agreement
with Frost, as Administrative Agent and the Other Lenders, dated as of
December 31, 2007.
Loans under the Revolving Loan Agreement may be deemed to be either base rate
loans or LIBOR rate loans. Base rate loans will bear interest at a per annum
rate equal to the greater of (a) the Prime Rate (as published by Bank of
America); (b) the Federal Funds Rate plus 0.50%; or (c) 30-day London Interbank
Offered Rate ("LIBOR") plus 1.0%; plus an applicable margin ranging from 0.75%
to 1.25% based on Craftmade's cash flow performance as measured by the Fixed
Charge Coverage Ratio (as defined in the Revolving Loan Agreement) for the most
recent month. LIBOR rate loans will bear interest at LIBOR for the applicable
Interest Period (30, 60 or 90 days), plus an applicable margin ranging from
3.00% to 4.00% based on Craftmade's cash flow performance as measured by the
Fixed Charge Coverage Ratio (as defined in the Revolving Loan Agreement) for the
most recent month. The maximum amount of loans under the Loan Agreement will be
determined by a formula (the "Borrowing Base") taking into consideration the
receivables and inventory of the Borrowers, net of any reserves put into place
by Bank of America. The Loan Agreement will terminate on July 7, 2012.
Pursuant to the Revolving Loan Agreement, the financial covenants require
Craftmade to maintain a Fixed Charge Coverage Ratio of not less than 0.85 for
the initial periods, and building to not less that 1.0 by August, 2009 and
thereafter. All wholly-owned domestic subsidiaries of Craftmade and Design
Trends LLC, a 50% owned subsidiary of Craftmade, have agreed to be guarantors of
the Revolving Loan Agreement (the "Guarantors"). Should Craftmade achieve and
maintain a minimum of $6,000,000 of availability (calculated as the Borrowing
Base minus the principal balance of all loans) for 60 days, the Fixed Charge
Coverage Ratio shall not be tested until such time as availability drops below
$6,000,000.
The Frost Note bears a floating interest rate based on Prime Rate (as published
in the Wall Street Journal) plus 2.0% per annum. Pursuant to the Frost Note,
Woodard has agreed to pay equal monthly payments of principal and interest based
on a 10-year amortization schedule, with the unpaid principal and interest
payable on July 7, 2012. As security for the payment and performance of the
Frost Note, Woodard granted to Frost a lien in the Michigan Facility pursuant to
a mortgage (the "Mortgage"), which facility Woodard acquired as part of the
January 4, 2008 acquisition of certain net assets of Woodard, LLC. Craftmade
entered into guaranty agreements ("Guaranties") with Frost pursuant to which
Craftmade, together with certain of its direct or indirect subsidiaries, has
agreed to guarantee payment and performance of the Frost Note by Woodard.
The Revolving Loan Agreement and the Term Loan Agreement are subject to
customary events of default. If any event of default occurs and is continuing,
Bank of America or Frost, respectively, may accelerate amounts due under the
agreements and exercise other rights and remedies.
The foregoing is a summary of the terms of the Revolving Loan Agreement, the
Term Loan Agreement, the Frost Note, and Mortgage and does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Revolving Loan Agreement, the Term Loan Agreement, the Frost Note, and Mortgage
which are filed as Exhibits 10.1 through 10.4 hereto.
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