7. Long-Term Debt

In March 2019 the Company, and its subsidiaries Emerging Power Inc. and Emergent Power Inc., entered in to a loan and security agreement, as amended (the “Loan Agreement”) with Generate Lending, LLC (“Generate Capital”), providing for a secured term loan facility in the amount of $100.0 million (the “Term Loan Facility”). The Company borrowed $85.0 million under the Loan Agreement on the date of closing and borrowed an additional $15.0 million in April 2019. A portion of the initial proceeds of the loan were used to pay in full the Company’s long-term debt, including accrued interest of $17.6 million under the loan and security agreement, dated as of July 21, 2017, by and among the Company, Emerging, Emergent and NY Green Bank, a Division of the New York State Energy Research & Development Authority (the “Green Bank Loan”) and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC and repurchase the associated leased equipment. In connection with this transaction, the Company recognized a loss on extinguishment of debt of approximately $0.5 million. This loss was recorded in interest and other expenses, net in the Company’s unaudited interim consolidated statement of operations. Additionally, $1.7 million was paid to an escrow account related to additional fees for the Green Bank Loan if the Company does not meet certain New York State employment and fuel cell deployment targets by March 2021. This amount paid to an escrow account is recorded in long-term other assets on the Company’s unaudited interim consolidated balance sheet as of March 31, 2019. On March 31, 2019, the outstanding principal balance under the Term Loan Facility was $85.0 million. The collective balance of $32.1 million in loan proceeds will be used to fund working capital for ongoing deployments and other general corporate purposes of the Company.

Advances under the Term Loan Facility bear interest of 12.00% per annum. The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. The term of the loan is three years, with a maturity date of December 13, 2022. Principal payments will be funded in part by releases of restricted cash, as described in Note 15, Commitments and Contingencies.

Interest and a portion of the principal amount is payable on a quarterly basis and the entire then outstanding principal balance of the Term Loan Facility, together with all accrued and unpaid interest, is due and payable on the maturity date of December 13, 2022. The Company may also be required to pay Generate Capital additional fees of up to $1.5 million if the Company is unable to provide $50.0 million of structured project financing arrangements with Generate Capital prior to December 31, 2021.

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 that is first measured on December 31, 2019 and is based on certain factors that are yet to be determined and on a third party valuation that has yet to be completed. 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.

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.

The Term Loan Facility requires the principal balance at the end of each of the following years may not exceed (in thousands):


December 31, 2019	$	79,638
December 31, 2020		58,034
December 31, 2021		36,106
December 31, 2022		—