ended September 30, 2020, the Company received $250 thousand from
escrow related to the New York state employment targets.
Additionally, on May 6, 2020, the Company and its subsidiaries,
Emerging Power, Inc. and Emergent Power, Inc., entered into a Fifth
Amendment (the Amendment) to the Loan Agreement and Security
Agreement, dated as of March 29, 2019, as amended (the Loan
Agreement) with Generate Lending, LLC (Generate Capital). The
Amendment amends the Loan Agreement to, among other things,
(i) provide for an incremental term loan in the amount of $50.0
million, (ii) provide for additional, uncommitted incremental term
loans in an aggregate amount not to exceed $50.0 million, which may
become available to the Company in Generate Capital’s sole
discretion, (iii) reduce the interest rate on all loans to 9.50%
from 12.00% per annum, and (iv) extend the maturity date to October
31, 2025 from October 6, 2022. The $50 million incremental term
loan has been fully funded. In connection with the restructuring,
the Company capitalized $1.0 million of origination fees and
expensed $300 thousand in legal fees. In the third quarter of 2020,
the Company borrowed an additional $50.0 million, under the amended
Loan Agreement.
On September 30, 2020, the outstanding balance under the Term Loan
Facility was $185.0 million with a 9.5% annual interest rate.
The Loan Agreement includes covenants, limitations, and events of
default customary for similar facilities. Interest and a portion of
the principal amount is payable on a quarterly basis.
Principal payments will be funded in part by releases of
restricted cash, as described in Note 16, Commitments and
Contingencies. Based on the amortization schedule as of September
30, 2020, the outstanding balance of $185.0 million under the Term
Loan Facility must be fully paid by October 31, 2025.
All obligations under the Loan Agreement are unconditionally
guaranteed by Emerging Power Inc. and Emergent Power
Inc. The Term Loan Facility is secured by substantially
all of the Company’s and the guarantor subsidiaries’ assets,
including, among other assets, all intellectual property, all
securities in domestic subsidiaries and 65% of the securities in
foreign subsidiaries, subject to certain exceptions and
exclusions.
The Loan Agreement contains covenants, including, among
others, (i) the provision of annual and quarterly financial
statements, management rights and insurance policies and
(ii) restrictions on incurring debt, granting liens, making
acquisitions, making loans, paying dividends, dissolving, and
entering into leases and asset sales and (iii) compliance
with a collateral coverage covenant. The Loan Agreement also
provides for events of default, including, among others, payment,
bankruptcy, covenant, representation and warranty, change of
control, judgment and material adverse effect defaults at the
discretion of the lender. As of September 30, 2020, the Company was
in compliance with all the covenants.
The Loan Agreement provides that if there is an event of default
due to the Company’s insolvency or if the Company fails to perform
in any material respect the servicing requirements for fuel cell
systems under certain customer agreements, which failure would
entitle the customer to terminate such customer agreement, replace
the Company or withhold the payment of any material amount to the
Company under such customer agreement, then Generate Capital has
the right to cause Proton Services Inc., a wholly owned subsidiary
of the Company, to replace the Company in performing the
maintenance services under such customer agreement.
As of September 30, 2020, the Term Loan Facility requires the
principal balance as of each of the following dates not to exceed
the following (in thousands):
|
|
|
December 31, 2020
|
$
|
164,017
|
December 31, 2021
|
|
127,317
|
December 31, 2022
|
|
93,321
|
December 31, 2023
|
|
62,920
|
December 31, 2024
|
|
33,692
|
December 31, 2025
|
|
—
|