Item 1.01 Entry into a Material Definitive Agreement
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On June 2, 2017, Capstone Turbine Corporation, a Delaware corporation (the “Company”), entered into two secured credit facilities (the “Credit Agreements”) with Western Alliance Bank through its Bridge Bank division (“Bridge Bank”), with credit support provided by the Export-Import Bank of the United States through its working capital guarantee program. Under the terms of the Credit Agreements, the Company may borrow up to $12.0 million on a revolving basis depending on, among other factors, the amount of the Company’s eligible inventory and accounts receivable. The Credit Agreements are for a two-year period ending June 2, 2019.
The Company maintained two Credit and Security Agreements, with Wells Fargo Bank, National Association (“Wells Fargo”), that provided the Company with a credit facility up to $20.0 million in the aggregate. Upon closing with Bridge Bank the Company’s existing credit facilities with Wells Fargo, were paid off in full.
Total borrowings, letter of credit obligations and the then aggregate committed amount of cash management services under the Credit Agreements
may not exceed 85% of the sum of unrestricted cash and the amount of cash collateral held at Bridge Bank
. As a condition of the Credit Agreements, the Company has restricted $5.0 million of cash equivalents as additional security for the credit facility. Borrowings under the Credit Agreements will bear per annum interest at the prime rate plus 1.5 percent, subject to increase during the occurrence of an event of default. Obligations under the Credit Agreements are secured by all of the Company’s assets, including intellectual property and general intangibles.
The Credit Agreements include affirmative covenants as well as negative covenants that prohibit a variety of actions without Bridge Bank’s consent, including covenants that limit the Company’s ability to (a) incur or guarantee debt, (b) create liens, (c) enter into any merger, recapitalization or similar transaction or purchase all or substantially all of the assets or stock of another entity, or (d) sell, assign, transfer or otherwise dispose of the Company’s assets.
The financial covenants of the domestic credit agreement with Bridge Bank (the “Domestic Facility”) requires the Company not to exceed specified levels of losses relative to its financial model and the outstanding line of credit advances may not exceed 85% of the sum of unrestricted cash and the amount of cash collateral held at Bridge Bank. The Domestic Facility also defines an event of default to include a material adverse effect on the Company’s business. An event of default for this or any other reason, if not waived, could have a material adverse effect on the Company.
The description of the Credit Agreements does not purport to be complete and is qualified in its entirety by the reference to the full text of the Credit Agreements, a copy of which are filed herewith as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3.