Item 1.01 Entry into a Material Definitive Agreement.
On
April 22, 2020, SharpSpring,
Inc. (the “Company”) received $165,500
in loan funding from the Paycheck
Protection Program (the “PPP”), established pursuant to
the recently enacted Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”) and administered by the U.S.
Small Business Administration (“SBA”). The unsecured
loan (“PPP Loan #1”) is evidenced by a promissory note
made by SharpSpring Reach,
Inc., a wholly owned subsidiary of the Company, dated April 20, 2020 (“Note
#1”) in the principal amount of $165,500,
to Western Alliance
Bank (the “Bank”),
the lender.
On
April 23, 2020, SharpSpring,
Inc. (the “Company”) received $3,234,000
in loan funding from the PPP,
established pursuant to the CARES Act and administered by the SBA.
The unsecured loan (“PPP Loan #2”) is evidenced by a
promissory note made by SharpSpring
Technologies, Inc., a wholly owned subsidiary of
the Company, dated April 21, 2020
(“Note #2”) in the principal amount of
$3,234,000,
to the Bank,
the lender.
PPP
Loan #1 and PPP Loan #2 are collectively referred to herein as the
“PPP Loans” and Note #1 and Note #2 are collectively
referred to herein as the “Notes” and each a
“Note.”
Under
the terms of the Notes and the PPP Loans, interest accrues on the
outstanding principal at the rate of 1.0% per annum. The term of
each Note is two years, though it may be payable sooner in
connection with an event of default under the Note. To the extent
the PPP Loan amounts are not forgiven under the PPP, the Company is
obligated to make equal monthly payments of principal and interest,
beginning seven months from the date of each Note, until the
maturity date.
The CARES Act and the PPP provide a mechanism for
forgiveness of up to the full amount borrowed. Under the PPP, the
Company may apply for and be granted forgiveness for all or part of
each PPP Loan. The amount of loan proceeds eligible for forgiveness
is based on a formula that takes into account a number of factors,
including the amount of loan proceeds used by the Company during
the eight-week period after the loan origination for certain
purposes including payroll costs, rent payments on certain leases,
and certain qualified utility payments, provided that at least 75%
of the loan amount is used for eligible payroll costs; the employer
maintaining or rehiring employees and maintaining salaries at
certain levels; and other factors. Subject to the other
requirements and limitations on loan forgiveness, only loan
proceeds spent on payroll and other eligible costs during the
covered eight-week period will qualify for
forgiveness. The Company intends to
use the entire PPP Loan amounts for qualifying expenses, though
no assurance is provided that
the Company will obtain forgiveness of the PPP Loans in whole or in
part.
The
Notes may be prepaid in part or in full, at any time, without
penalty. The Notes contains
customary events of default relating to, among other things,
payment defaults, making materially false and misleading
representations to the SBA or the Bank, or breaching the terms of
the Notes. Upon the occurrence of an event of default on a
Note, the Bank has customary remedies and may, among other things,
require immediate payment of all amounts owed under the Note,
collect all amounts owing from the Company, file suit and obtain
judgment against the Company.
The
foregoing description of the Notes is qualified in its entirety by
reference to the full text of the Notes, copies of which are filed
as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K and
incorporated by reference herein.