Item 1.01.
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Entry into a Material Definitive Agreement.
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On April 20, 2020, FuelCell Energy, Inc. (the “Company”) entered into a Paycheck Protection Program Promissory Note, dated April 16, 2020 (“Note”), evidencing a loan to the Company from Liberty Bank under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (“SBA”).
Pursuant to the Note, the Company received total proceeds of approximately $6.5 million on April 24, 2020. In accordance with the requirements of the CARES Act, the Company will use the proceeds primarily for payroll costs.
The Note is scheduled to mature on April 16, 2022, has a 1.00% per annum interest rate, and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. Monthly principal and interest payments, less the amount of any potential forgiveness (as discussed below), will commence on November 16, 2020. The Company did not provide any collateral or guarantees for the Note, nor did the Company pay any facility charge to obtain the Note. The Note provides for customary events of default, including, among others, those relating to failure to make a payment when due under the Note, failure to comply with any provision of the Note, bankruptcy, and breaches of or materially misleading representations. Upon the occurrence of an event of default, Liberty Bank may require immediate payment of all amounts owing under the Note, collect all amounts owing from the Company, and pursue other remedies. The Note may be prepaid at any time with no prepayment penalties.
Proceeds may only be used for the Company’s eligible payroll costs (with salary capped at $100,000 on an annualized basis for each employee), rent and utilities, in each case paid during the eight-week period following disbursement. However, at least 75% of the proceeds must be used for eligible payroll costs. The loan may be fully forgiven if (i) proceeds are used to pay eligible payroll costs, rent and utilities and (ii) full-time employee headcount and salaries are either maintained during the applicable eight-week period or restored by June 30, 2020. If not so maintained or restored, forgiveness of the loan will be reduced in accordance with the regulations to be issued by the SBA. Any forgiveness of the loan will be subject to approval by the SBA and Liberty Bank and will require the Company to apply for such treatment in the future. The Company will carefully monitor all qualifying expenses and other requirements necessary to maximize loan forgiveness.
The Company has an existing relationship with Liberty Bank that is unrelated to this loan, through the Company’s affiliate Bridgeport Fuel Cell, LLC, which, on May 9, 2019, entered into a Credit Agreement with Liberty Bank, as Administrative Agent and Co-Lead Arranger, to fund the acquisition of the Bridgeport Fuel Cell Park.
The foregoing description of the loan and the Note is a summary and is qualified in its entirety by reference to the full text of the Note, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.