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.