Item 1.01. Entry into a Material Definitive Agreement.
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.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 of this Current Report on Form 8-K is
hereby incorporated by reference into this Item 2.03.
Item 5.02.Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Salary Deferrals
On April 23, 2020, as part of the efforts by the Company to mitigate the
financial and operational impacts of COVID-19, the Company determined to take
certain compensation actions affecting certain executives, including the
currently employed named executive officers identified in the Company's most
recent proxy statement filed with the Securities and Exchange Commission
(collectively, the "Officers"). Effective May 1, 2020, a portion of each
Officer's base salary will be deferred for three months (i.e., the months of
May, June and July), at the end of which time the Company will pay such deferred
amounts to such Officers over a three month period (i.e., over the months of
August, September and October). The base salary deferrals will be 20% of base
salary for Jason Few, the President, Chief Executive Officer (the "CEO") and
Chief Commercial Officer, and 10% of base salary for each of Michael Bishop, the
Chief Financial Officer and Treasurer, Michael Lisowski, the Chief Operating
Officer, Anthony Leo, the Chief Technology Officer, and Jennifer Arasimowicz,
the General Counsel, Corporate Secretary and Chief Administrative Officer.
Additionally, the CEO's monthly commuting expenses of $13,000 will be suspended
until such time as the CEO resumes commuting between Houston and Connecticut.
Amendment to CEO Employment Agreement
On April 23, 2020, due to the travel impacts of COVID-19, the Company entered
into an amendment (the "Amendment") to the Employment Agreement, effective as of
August 26, 2019, between the Company and the CEO (the "Employment
Agreement"). The Amendment provides that the Company shall pay to the CEO a lump
sum cash payment in the gross amount of $200,000, within 30
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days following his relocation to the Danbury, Connecticut area, provided that
(i) such relocation occurs by no later than eighteen months after the effective
date of the Employment Agreement and (ii) the CEO is employed by the Company on
the date of any such payment. This provision of the Amendment extends the time
for making such relocation payment by 6 months, as under the original Employment
Agreement, the relocation payment would be made only if the relocation occurred
no later than the first anniversary of the effective date of the Employment
Agreement. The Amendment further provides that the CEO's commuting and apartment
expenses, which were to be paid by the Company through the first anniversary of
the effective date of the Employment Agreement, will continue to be paid through
the date that is eighteen months after the effective date of the Employment
Agreement in the amounts set forth in the Employment Agreement. All other terms
and conditions of the Employment Agreement remain in full force and effect.
The foregoing description of the Amendment is a summary and is qualified in its
entirety by reference to the full text of the Amendment, which is attached as
Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference
into this Item 5.02.
Item 7.01. Regulation FD Disclosure.
On April 23, 2020, the Company also advised certain affected employees that,
effective May 1, 2020, there will be a temporary salary deferral for all Senior
Vice Presidents and Vice Presidents of the Company in the United States and
Canada of 10% for a period of three months (i.e., May, June and July) at the end
of which time the Company will pay such deferred amounts (i.e., over the months
of August, September and October).
The information furnished in this Item 7.01 is not deemed to be "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise subject to the liability of that section. This
information will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference.
Item 9.01.Financial Statements and Exhibits.
(d) The following exhibits are being furnished herewith:
Exhibit No. Description
10.1 Paycheck Protection Program Promissory Note entered into on April 20,
2020 and dated April 16, 2020, between Liberty Bank and FuelCell
Energy, Inc.
10.2 First Amendment, dated as of April 23, 2020, to the Employment
Agreement, effective as of August 26, 2019, between FuelCell Energy,
Inc. and Jason B. Few.
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