Item 1.01.
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Entry into a Material Definitive Agreement.
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(a)
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Paycheck Protection Program Loan
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On April 19, 2020, Crown Crafts, Inc. (the “Company”) executed a Note (the “Note”) made in connection with a loan (the “Loan”) made pursuant to the U.S. Small Business Administration Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The Note was entered into with CIT Bank, N.A. (the “Lender”) for the principal amount of $1,963,800 and will accrue interest at 1.0% per year.
The Note will mature on April 20, 2022, at which time all remaining outstanding principal and accrued interest amounts under the Note will become due and payable. No payments of principal or interest will be due under the Note until October 20, 2020, although interest will continue to accrue during the deferment period. Beginning November 1, 2020, the Company will be required to pay monthly installments of principal and interest in the amount necessary to fully amortize the Loan through the maturity date. The Note may be prepaid at any time prior to maturity without penalty.
As authorized by the provisions of the CARES Act, the Company may apply to the Lender for forgiveness of all or a portion of the Loan in an amount equal to the sum of certain allowable costs incurred by the Company during the 8-week period beginning on April 20, 2020. Such forgiveness will be determined, subject to limitations, based on the use of Loan proceeds for payroll costs, mortgage interest, rent or utility costs. No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part.
The Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the Note. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company.
Additionally, the Note is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act.
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(b)
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Conditional Consent to Paycheck Protection Program Loan
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On April 19, 2020, the Company, together with its wholly-owned subsidiaries Sassy Baby, Inc., NoJo Baby & Kids, Inc. and Carousel Designs, LLC (the “Companies”), entered into a Conditional Consent to Paycheck Protection Program Loan (the “Consent”) with The CIT Group/Commercial Services, Inc. (“CIT”). Absent the Consent, the execution of the Note by the Company would have given rise to an event of default under that certain Financing Agreement, dated July 11, 2006 (as amended or otherwise modified from time to time, the “Financing Agreement”), entered into by and between the Companies and CIT. Subject to the terms and conditions set forth in the Consent, CIT provided its consent to the incurrence of the Loan.
The descriptions contained herein of the Note, the Consent and the Financing Agreement are qualified in their entirety by reference to the terms of such documents, which are attached hereto as Exhibits 99.1, 99.2 and 99.3, respectively, and are incorporated herein by this reference.