Item
1.01
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Entry
into a Material Definitive Agreement.
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Loan
and Security Agreement
On
August 31, 2020, Polar Power, Inc. (the “Company”) entered into a Loan and Security Agreement (the “Loan Agreement”)
dated August 31, 2020 by and between the Company and Pinnacle Bank (“Pinnacle”). The Loan Agreement provides for a
revolving credit facility under which Pinnacle may, in its sole discretion upon the request of the Company, make advances to the
Company in an amount, subject to certain limitations and adjustments, of up to (a) 85% of the aggregate net face amount of the
Company’s accounts receivable and other contract rights and receivables, plus (b) the lesser of (i) 35% of the lower of
cost or wholesale market value of certain inventory of the Company or (ii) $2.5 million. In no event shall the aggregate amount
of the outstanding advances under the revolving credit facility be greater than $4 million.
Interest
accrues on the daily balance at a rate of 1.25% above the prime rate (the “Standard Interest Rate”), but in no event
shall the Standard Interest Rate be less than 3.75% per annum. Interest on the portion of the daily balance consisting of advances
against inventory accrues interest at a rate of 2.25% above the prime rate per annum (the “Inventory Interest Rate”),
but in no event shall the Inventory Interest Rate be less than 4.75% per annum.
The
Loan Agreement obligates the Company to pay Pinnacle a yearly facility fee in an amount equal to 1.125% of the sum of the advance
limit plus the original principal balance of any term loans and advances other than under the revolving credit facility.
The
Loan Agreement’s initial term ends on August 30, 2022 (the “Initial Term”) and is renewed for additional one-year
terms (each, a “Renewal Term”) until either party exercises its termination right. Either party may terminate the
Loan Agreement on the last day of the Initial Term or subsequent Renewal Term by giving the other party at least sixty days prior
written notice. In addition, Pinnacle may terminate the Loan Agreement at any time upon sixty days prior written notice and immediately
upon the occurrence of an event of default.
Under
the Loan Agreement, the Company also agreed to grant Pinnacle a security interest in all presently existing and thereafter acquired
or arising assets of the Company in order to secure prompt payment of its obligations under the Loan Agreement.
The
Loan Agreement also contains customary representations, warranties and covenants, and other terms and conditions.
The
description of the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the Loan Agreement,
which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by this reference.
First
Modification to Loan and Security Agreement
On
October 7, 2020, the Company entered into a First Modification to Loan and Security Agreement (the “First Modification”)
dated October 7, 2020 by and between the Company and Pinnacle under which the parties agreed to amend (a) the date of the Loan
Agreement from August 31, 2020 to September 30, 2020, and (b) the date of the Initial Term and a reference to the initial termination
date in the Loan Agreement from August 30, 2022 to September 30, 2022.
The
First Modification also contains other customary terms and conditions.
The
description of the First Modification does not purport to be complete and is qualified in its entirety by reference to the First
Modification, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by this reference.
Item
1.02
|
Termination
of a Material Definitive Agreement.
|
On
October 8, 2020, the Company terminated that certain Supplier Agreement (the “Supplier Agreement”) with Citibank,
N.A. (“Citibank”), executed by the Company on May 20, 2019 and effective between the parties on June 4, 2019, pursuant
to the provisions of the Supplier Agreement allowing either party to terminate the Supplier Agreement for any reason upon thirty
business days prior written notice to the other party, which written notice the Company delivered to Citibank on August 26, 2020.
No termination fee or other penalty was payable in connection with the termination of the Supplier Agreement.
A
description of the Supplier Agreement is set forth in the Company’s Current Report on Form 8-K for June 4, 2019 filed with
the Securities and Exchange Commission on June 6, 2019 and is incorporated herein by this reference.