Item 1.01Entry into a Material Definitive Agreement
Paycheck Protection Program
On April 15, 2020, Capstone Turbine Corporation (the “Company”) submitted an application to its banking partner Western Alliance Bank, an Arizona corporation (“Western Alliance”) under the Small Business Administration (the “SBA”) Paycheck Protection Program enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). Western Alliance entered into Note on April 24, 2020 (the “Note”) with the Company and agreed to make available to the Company a loan in the amount of $2,610,200.00 (the “Loan”). The Company received the full amount of the Loan on April 24, 2020 (the “Initial Disbursement Date) and currently plans to use the proceeds to support fixed costs such as payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act.
The advance under the Loan bears interest at a rate per annum of 1%. The term of the Loan is two years, ending April 24, 2022 (the “Maturity Date”).
Beginning on the seventh month following the Initial Disbursement Date, the Company is required to pay monthly principal and interest payments, with each installment payment first to pay interest accrued since the Initial Disbursement Date, then to bring principal current. The Company may adjust the payment amount periodically to amortize the principal over the remaining term of the Note.
The Loan may be forgiven partially or fully if the funding received are used for payroll costs, interest on mortgages, rent, and utilities, provided that at least 75% of the forgiven amount has been used for payroll costs. Forgiveness is based on the Company maintaining, or quickly rehiring employees and maintaining applicable salary levels.
Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Any forgiveness of the Loan shall be subject to approval of the SBA and will require the Company and Western Alliance to apply to the SBA for such treatment in the future.
The Note also provides for customary events of default, including, among others, events of default relating to failure to make payment, bankruptcy, breaches of representations, failure to pay taxes due and material adverse effects.
The foregoing summary of the Note does not purport to be complete and is qualified in its entirety by reference to the Note, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Third Amendment to the Note Purchase Agreement
On April 24, 2020, the Company, certain subsidiaries of the Company and Goldman Sachs Specialty Lending Group, L.P. (as successor in interest to Goldman Sachs Specialty Lending Holdings, Inc.) (the “Purchaser” and collectively, the “Parties”) entered into a Third Amendment (the “Third Amendment”) to the Note Purchase Agreement, dated February 4, 2019, by and among the parties thereto (as amended, the “Note Purchase Agreement”) in connection with the sale of senior secured notes of the Company in a private placement exempt from registration under the Securities Act of 1933, as amended. Under the Third Amendment, the parties agreed to amend the Note Purchase Agreement to, among other things, carve out the Loan pursuant to the CARES Act from the negative covenants restricting the Company from incurring certain debt and the related terms and conditions as a result of such Loan. All other provisions, terms and conditions of the Note Purchase Agreement remain in effect, as previously reported in the Current Reports on Form 8-K filed on February 5, 2019 and December 9, 2019, which are incorporated herein by reference.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Third Amendment, which is filed as Exhibit 4.1 to this Current Report on Form 8-K, and incorporated herein by reference.