Exhibit 10.27

 

SEVENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENTS
AND WAIVER OF DEFAULT

 

THIS SEVENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENTS AND WAIVER OF DEFAULT
(the “Amendment”), dated as of June 9, 2011, is entered into by and between
CAPSTONE TURBINE CORPORATION, a Delaware corporation (“Company”), and WELLS
FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), acting through its Wells Fargo
Business Credit operating division.

 

RECITALS

 

A.            Company and Wells Fargo are parties to (i) a Credit and Security
Agreement dated February 9, 2009 (as amended by that certain First Amendment to
Credit and Security Agreements, dated June 9, 2009 (“First Amendment”), that
certain Second Amendment to Credit and Security Agreements and Waiver of
Defaults, dated November 5, 2009 (“Second Amendment”), that certain Third
Amendment to Credit and Security Agreements and Waiver of Default, dated
June 11, 2010 (“Third Amendment”), that certain Fourth Amendment to Credit and
Security Agreements, dated June 29, 2010 (“Fourth Amendment”), that certain
Fifth Amendment to Credit and Security Agreements, dated November 9, 2010
(“Fifth Amendment”), and that certain Sixth Amendment to Credit and Security
Agreement and Waiver of Default, dated March 23, 2011 (“Sixth Amendment”), and
as further amended from time to time, the “Domestic Credit Agreement”), and
(ii) a Credit and Security Agreement (Ex-Im Subfacility), dated February 9, 2009
(as amended by the First Amendment, the Second Amendment, the Third Amendment,
the Fourth Amendment, the Fifth Amendment, and the Sixth Amendment, and further
amended from time to time, the “Ex-Im Credit Agreement”; and together with the
Domestic Credit Agreement, the “Credit Agreements”).  Capitalized terms used in
these recitals have the meanings given to them in the Credit Agreements unless
otherwise specified.

 

B.            Company has requested that (i) certain amendments be made to the
Credit Agreements, and (ii) an Event of Default be waived, both of which Wells
Fargo is willing to agree to pursuant to the terms and conditions set forth
herein.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

 

1.                                       Amendments to Credit Agreements.  The
Credit Agreements are amended as follows:

 

1.1           Section 5.2(a) of the Credit Agreements.  Section 5.2(a) of the
Credit Agreements is deleted in its entirety, and replaced with “[Intentionally
Omitted].”

 

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1.2                                 Section 5.2(b) of the Credit Agreements. 
Section 5.2(b) of the Credit Agreements is amended to read in its entirety as
follows:

 

“(a)         Minimum Net Income.  Company shall achieve Net Income, measured on
each of the following test dates described below, for the fiscal year to date
period ending on each such test date, of not less than the amount set forth
opposite each such test date (numbers appearing between “< >” are negative):

 

Test Date

 

Minimum Net Income

 

June 30, 2011

 

$

<9,230,000

> 

September 30, 2011

 

$

<15,699,000

> 

December 31, 2011

 

$

<20,790,000

> 

March 31, 2012

 

$

<23,418,000

> 

 

1.3                                 Section 5.2(d) of the Credit Agreements. 
Section 5.2(d) of the Credit Agreements is amended to read in its entirety as
follows:

 

“(d)         Capital Expenditures.  Company shall not incur or contract to incur
Capital Expenditures of more than (i) $2,000,000 in the aggregate during
Company’s fiscal year ending March 31, 2012, and (ii) zero for each subsequent
year until Company and Wells Fargo agree on limits on Capital Expenditures for
subsequent periods based on Company’s projections for such periods.”

 

1.4                                 Section 5.28 of the Credit Agreements. 
Section 5.28 of the Credit Agreements is deleted in its entirety, and replaced
with “[Intentionally Omitted].”  The remaining “Cash Collateral” described in
such Section 5.28 of the Credit Agreements held by Wells Fargo shall be released
to Company upon the effectiveness of this Amendment.

 

1.5                                 Exhibit D to the Credit Agreements. 
Paragraph (e) of Exhibit D to the Credit Agreements is amended to read in its
entirety as follows:

 

“(e)         Subsidiaries.  Except as disclosed below, Company has no
Subsidiaries.

 

Subsidiaries

 

Capstone Turbine International, Inc., a Delaware corporation

 

Capstone Turbine Singapore Pte. Ltd.”

 

1.6                                 Exhibit E to the Domestic Credit Agreement. 
Exhibit E to the Domestic Credit Agreement is hereby deleted and replaced with
Exhibit E-1 attached to this Amendment.

 

1.7                                 Exhibit E to the Ex-Im Credit Agreement. 
Exhibit E to the Ex-Im Credit Agreement is hereby deleted and replaced with
Exhibit E-2 attached to this Amendment.

 

2.                                       Waiver of Default.  Company is in
default of the following provision of the Credit Agreements (the “Existing
Default”):

 

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Section/Covenant

 

Description

Section 5.2(b)
(Minimum Net Income)

 

Company breached the minimum Net Income covenant for the quarter ended March 31,
2011

 

Upon the terms and subject to the conditions set forth in this Amendment
(including, but not limited to, the effectiveness of this Amendment in
accordance with Section 5 of this Amendment), Wells Fargo hereby waives the
Existing Default.  This waiver shall be effective only in this specific instance
and for the specific purpose for which it is given, and this waiver shall not
entitle Company to any other or further waiver in any similar or other
circumstances.

 

3.                                       No Other Changes.  Except as explicitly
amended by this Amendment, all of the terms and conditions of the Credit
Agreements shall remain in full force and effect and shall apply to any advance
or letter of credit thereunder.

 

4.                                       Accommodation Fee.  Company shall pay
Wells Fargo as of the date hereof a fully earned, non-refundable accommodation
fee in the amount of $60,000 in consideration of Wells Fargo’s execution and
delivery of this Amendment (the “Accommodation Fee”).

 

5.                                       Conditions Precedent.  This Amendment
shall be effective when Wells Fargo shall have received an executed original of
this Amendment, together with each of the following, each in substance and form
acceptable to Wells Fargo in its sole discretion:

 

5.1           A Certificate of the Secretary of Company certifying as to (i) the
resolutions of the board of directors of Company approving the execution and
delivery of this Amendment, (ii) the fact that the certificate of incorporation
and bylaws of Company, which were certified and delivered to Wells Fargo
pursuant to the Certificate of Authority of Company’s secretary or assistant
secretary dated February 9, 2009, continue in full force and effect and have not
been amended or otherwise modified except as set forth in the Certificate to be
delivered, and (iii) the fact that the officers and agents of Company who have
been certified to Wells Fargo, pursuant to the Certificate of Authority of
Company’s secretary or assistant secretary dated February 9, 2009, as being
authorized to sign and to act on behalf of Company continue to be so authorized;

 

5.2           Consent and approval of this Amendment by the Export Import Bank
of the United States, if required by Wells Fargo;

 

5.3           The Acknowledgement and Agreement of Guarantor set forth at the
end of this Amendment, duly executed by Guarantor;

 

5.4           Payment of the Accommodation Fee described in Section 4 of this
Amendment; and

 

5.5           Such other matters as Wells Fargo may require.

 

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6.                                       Representations and Warranties. 
Company hereby represents and warrants to Wells Fargo as follows:

 

6.1           Company has all requisite power and authority to execute this
Amendment and any other agreements or instruments required hereunder and to
perform all of its obligations hereunder, and this Amendment and all such other
agreements and instruments have been duly executed and delivered by Company and
constitute the legal, valid and binding obligation of Company, enforceable in
accordance with their terms.

 

6.2           The execution, delivery and performance by Company of this
Amendment and any other agreements or instruments required hereunder have been
duly authorized by all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to Company, or the certificate
of incorporation or bylaws of Company, or (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Company is a party or by which it
or its properties may be bound or affected.

 

6.3           After giving effect to this Amendment, all of the representations
and warranties contained in Section 4 of, and Exhibit D to, the Credit
Agreements are true and correct on and as of the date hereof as though made on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date (in which case they shall continue
to be true and correct as of such earlier date), provided that the Existing
Default has occurred.

 

7.                                       References.  All references in the
Credit Agreements to “this Agreement” shall be deemed to refer to the relevant
Credit Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreements shall be deemed to refer to the relevant
Credit Agreement as amended hereby.

 

8.                                       No Waiver.  Except as expressly
provided in Section 2 of this Amendment, the execution of this Amendment and the
acceptance of all other agreements and instruments related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreements or a waiver of any breach, default or event of default under any
Security Document or other document held by Wells Fargo, whether or not known to
Wells Fargo and whether or not existing on the date of this Amendment.

 

9.                                       Release.  Company and the Guarantor
signing the Acknowledgment and Agreement of Guarantor set forth below hereby
absolutely and unconditionally release and forever discharge Wells Fargo, and
any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents,
attorneys, and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which Company or Guarantor has had, now has or has made claim to have
against any such person for or by reason of any act, omission, matter, cause or
thing whatsoever arising from the beginning of time to and including the date of
this Amendment, whether such claims, demands

 

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and causes of action are matured or unmatured or known or unknown.  It is the
intention of the Company and Guarantor in executing this release that the same
shall be effective as a bar to each and every claim, demand and cause of action
specified and in furtherance of this intention the Company and Guarantor each
waives and relinquishes all rights and benefits under Section 1542 of the Civil
Code of the State of California, which provides:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MIGHT HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

 

The parties acknowledge that each may hereafter discover facts different from or
in addition to those now known or believed to be true with respect to such
claims, demands, or causes of action and agree that this instrument shall be and
remain effective in all respects notwithstanding any such differences or
additional facts.

 

10.                                 Costs and Expenses.  Company hereby
reaffirms its agreement under the Credit Agreements to pay or reimburse Wells
Fargo on demand for all costs and expenses incurred by Wells Fargo in connection
with the Loan Documents, including, without limitation, all reasonable fees and
disbursements of legal counsel.  Without limiting the generality of the
foregoing, Company specifically agrees to pay all reasonable fees and
disbursements of counsel to Wells Fargo for the services performed by such
counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto.  Company hereby agrees that Wells Fargo may,
at any time or from time to time in its sole discretion and without further
authorization by Company, make a loan to Company under the Credit Agreements, or
apply the proceeds of any loan, for the purpose of paying any such reasonable
fees, disbursements, costs and expenses and the fee set forth in Section 4 of
this Amendment.

 

11.                                 Miscellaneous.  This Amendment and the
Acknowledgment and Agreement of Guarantor may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.  Transmission by facsimile or “pdf” file of an executed
counterpart of this Amendment shall be deemed to constitute due and sufficient
delivery of such counterpart.  Any party hereto may request an original
counterpart of any party delivering such electronic counterpart.  This Amendment
and the rights and obligations of the parties hereto shall be construed in
accordance with, and governed by, the laws of the State of California.  In the
event of any conflict between this Amendment and the Credit Agreements, the
terms of this Amendment shall govern.  The Export-Import Bank of the United
States shall be an express intended beneficiary of this Amendment.

 

[Signatures on next page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.

 

 

 

WELLS FARGO BANK,

 

NATIONAL ASSOCIATION

 

 

 

 

 

By:

/s/Michael White

 

Print Name: Michael White

 

Title: Authorized Signatory

 

 

 

 

 

CAPSTONE TURBINE CORPORATION

 

 

 

By:

/s/Edward Reich

 

Print Name: Edward Reich

 

Its: Executive Vice President & Chief Financial Officer

 

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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

 

The undersigned, a guarantor of the indebtedness of Capstone Turbine Corporation
(“Company”) to Wells Fargo Bank, National Association (as more fully defined in
the Amendment, “Wells Fargo”), acting through its Wells Fargo Business Credit
operating division, pursuant to the separate Guaranty dated February 9, 2009
(“Guaranty”), hereby (i) acknowledges receipt of the foregoing Amendment;
(ii) consents and agrees to the terms (including without limitation the release
set forth in Section 9 of the Amendment) and execution and performance thereof;
(iii) reaffirms all obligations to Wells Fargo pursuant to the terms of the
Guaranty; and (iv) acknowledges that Wells Fargo may amend, restate, extend,
renew or otherwise modify the Credit Agreements and any indebtedness or
agreement of the Company, or enter into any agreement or extend additional or
other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the
Guaranty for all of the Company’s present and future indebtedness to Wells
Fargo.

 

 

 

CAPSTONE TURBINE INTERNATIONAL, INC.

 

 

 

By:

/s/ Edward Reich

 

Print Name:

Edward Reich

 

Title:

Executive Vice President & Chief Financial Officer

 

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Exhibit E-1

 

Exhibit E to Credit and Security Agreement

 

COMPLIANCE CERTIFICATE

 

To:          Wells Fargo Bank, National Association

Date:       [                                    , 201    ]

Subject:                  Financial Statements

 

In accordance with our Credit and Security Agreement dated February 9, 2009 (as
amended from time to time, the “Credit Agreement”), attached are the financial
statements of Capstone Turbine Corporation (the “Company”) dated
[                       , 201    ] (the “Reporting Date”) and the year-to-date
period then ended (the “Current Financials”).  All terms used in this
certificate have the meanings given in the Credit Agreement.

 

A.            Preparation and Accuracy of Financial Statements.  I certify that
the Current Financials have been prepared in accordance with GAAP, subject to
year-end audit adjustments, and fairly present Company’s financial condition as
of the Reporting Date.

 

B.            Name of Company; Merger and Consolidation.  I certify that:

 

(Check one)

 

¨            Company has not, since the date of the Credit Agreement, changed
its name or jurisdiction of organization, nor has it consolidated or merged with
another Person.

 

¨            Company has, since the date of the Credit Agreement, either changed
its name or jurisdiction of organization, or both, or has consolidated or merged
with another Person, which change, consolidation or merger:  ¨ was consented to
in advance by Wells Fargo in an Authenticated Record, and/or ¨ is more fully
described in the statement of facts attached to this Certificate.

 

C.            Events of Default.  I certify that:

 

(Check one)

 

¨            I have no knowledge of the occurrence of an Event of Default under
the Credit Agreement, except as previously reported to Wells Fargo in a Record.

 

¨            I have knowledge of an Event of Default under the Credit Agreement
not previously reported to Wells Fargo in a Record, as more fully described in
the statement of facts attached to this Certificate, and further, I acknowledge
that Wells Fargo may under the terms of the Credit Agreement impose the Default
Rate at any time during the resulting Default Period.

 

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D.            Litigation Matters.  I certify that:

 

(Check one)

 

¨            I have no knowledge of any material adverse change to the
litigation exposure of Company or any of its Affiliates or of any Guarantor.

 

¨            I have knowledge of material adverse changes to the litigation
exposure of Company or any of its Affiliates or of any Guarantor not previously
disclosed in Exhibit D, as more fully described in the statement of facts
attached to this Certificate.

 

E.             Financial Covenants.  I further certify that:

 

(Complete each of the following)

 

1.             Minimum Net Income.  Pursuant to Section 5.2(b) of the Credit
Agreement, as of the Reporting Date, Company’s Net Income was
[$                    ], which ¨ satisfies ¨ does not satisfy the requirement
that Net Income be not less than the amount required by such Section 5.2(b).

 

2.             Minimum Cash to Unreimbursed Line of Credit Advances Coverage
Ratio.  Pursuant to Section 5.2(c) of the Credit Agreement, as of the Reporting
Date, at all times, Company has ¨ has not ¨ been in compliance with the
requirement that the percentage of the unreimbursed Line of Credit Advances
under the Revolving Note plus the L/C Amount plus outstanding “Advances” under
the Ex-Im Credit Agreement to the amount of cash plus Cash Equivalents of
Company in which Wells Fargo has a perfected first priority security interest be
not greater than 80%.

 

3.             Capital Expenditures.  Pursuant to Section 5.2(d) of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, Company has
expended or contracted to expend during the fiscal year ended March 31,
201      , for Capital Expenditures, $                                 in the
aggregate, which ¨ satisfies ¨ does not satisfy the requirement that such
expenditures not exceed the limit for such fiscal year set forth in such
Section 5.2(d).

 

Attached are statements of all relevant facts and computations in reasonable
detail sufficient to evidence Company’s compliance with the financial covenants
referred to above, which computations were made in accordance with GAAP.

 

 

Capstone Turbine Corporation

 

 

 

By:

 

 

Its:

Chief Financial Officer

 

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Exhibit E-2

 

Exhibit E to Credit and Security Agreement (Ex-Im Subfacility)

 

COMPLIANCE CERTIFICATE

 

To:          Wells Fargo Bank, National Association

Date:       [                                    , 201    ]

Subject:                  Financial Statements

 

In accordance with our Credit and Security Agreement (Ex-Im Subfacility) dated
February 9, 2009 (as amended from time to time, the “Credit Agreement”),
attached are the financial statements of Capstone Turbine Corporation (the
“Company”) dated [                       , 201    ] (the “Reporting Date”) and
the year-to-date period then ended (the “Current Financials”).  All terms used
in this certificate have the meanings given in the Credit Agreement.

 

A.            Preparation and Accuracy of Financial Statements.  I certify that
the Current Financials have been prepared in accordance with GAAP, subject to
year-end audit adjustments, and fairly present Company’s financial condition as
of the Reporting Date.

 

B.            Name of Company; Merger and Consolidation.  I certify that:

 

(Check one)

 

¨            Company has not, since the date of the Credit Agreement, changed
its name or jurisdiction of organization, nor has it consolidated or merged with
another Person.

 

¨            Company has, since the date of the Credit Agreement, either changed
its name or jurisdiction of organization, or both, or has consolidated or merged
with another Person, which change, consolidation or merger:  ¨ was consented to
in advance by Wells Fargo in an Authenticated Record, and/or ¨ is more fully
described in the statement of facts attached to this Certificate.

 

C.            Events of Default.  I certify that:

 

(Check one)

 

¨            I have no knowledge of the occurrence of an Event of Default under
the Credit Agreement, except as previously reported to Wells Fargo in a Record.

 

¨            I have knowledge of an Event of Default under the Credit Agreement
not previously reported to Wells Fargo in a Record, as more fully described in
the statement of facts attached to this Certificate, and further, I acknowledge
that Wells Fargo may under the terms of the Credit Agreement impose the Default
Rate at any time during the resulting Default Period.

 

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D.            Litigation Matters.  I certify that:

 

(Check one)

 

¨            I have no knowledge of any material adverse change to the
litigation exposure of Company or any of its Affiliates or of any Guarantor.

 

¨            I have knowledge of material adverse changes to the litigation
exposure of Company or any of its Affiliates or of any Guarantor not previously
disclosed in Exhibit D, as more fully described in the statement of facts
attached to this Certificate.

 

E.             Financial Covenants.  I further certify that:

 

(Complete each of the following)

 

1.             Minimum Net Income.  Pursuant to Section 5.2(b) of the Credit
Agreement, as of the Reporting Date, Company’s Net Income was
[$                    ], which ¨ satisfies ¨ does not satisfy the requirement
that Net Income be not less than the amount required by such Section 5.2(b).

 

2.             Minimum Cash to Unreimbursed Line of Credit Advances Coverage
Ratio.  Pursuant to Section 5.2(c) of the Credit Agreement, as of the Reporting
Date, at all times, Company has ¨ has not ¨ been in compliance with the
requirement that the percentage of the unreimbursed Line of Credit Advances
under the Revolving Note plus the L/C Amount plus outstanding “Advances” under
the Domestic Facility Agreement to the amount of cash plus Cash Equivalents of
Company in which Wells Fargo has a perfected first priority security interest be
not greater than 80%.

 

3.             Capital Expenditures.  Pursuant to Section 5.2(d) of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, Company has
expended or contracted to expend during the fiscal year ended March 31,
201      , for Capital Expenditures, $                                 in the
aggregate, which ¨ satisfies ¨ does not satisfy the requirement that such
expenditures not exceed the limit for such fiscal year set forth in such
Section 5.2(d).

 

Attached are statements of all relevant facts and computations in reasonable
detail sufficient to evidence Company’s compliance with the financial covenants
referred to above, which computations were made in accordance with GAAP.

 

 

Capstone Turbine Corporation

 

 

 

By:

 

 

Its:

Chief Financial Officer

 

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