July 31, 2020 Update: HHS has extended the application deadline once again, and providers now have until August 28, 2020, to apply for distributions.

The deadline to apply for the $15 billion CARES Act Provider Relief Fund Dental Distribution has been extended to August 28, 2020 (pushing back the previous date of August 3, 2020).  The FAQs on the Dental Providers Distribution changes almost daily so this guidance is current as of July 31, 2020.  Here are ten key issues to understand:

1. The amount providers are eligible to receive from this targeted distribution is approximately 2% of reported gross revenue from patient care.
2. To be eligible to receive payments, providers must be on a “curated list of dental practice TINs” developed by HHS from third party sources and HHS datasets. Providers who are not on the “curated list” can still apply but will have to submit additional validation documentation.
3. Providers who received a payment from the $50 billion General Distribution are not eligible to apply for the Dental Providers Distribution.
4. Funds may be used to cover lost revenue attributable to Covid-19 or for health related expenses incurred to prevent, prepare for and respond to Covid-19.
5. Funds cannot be used to seek collection of out-of-pocket payments from a presumed or actual Covid-19 patient that are greater than what the patient would otherwise have been required to pay in-network.
6. Fund recipients are required to attest to terms and conditions, including consenting to the public disclosure of the amount received.
7. Recipients who receive more than $10,000 in the aggregate will be required to comply with specific reporting requirements on the use of funds received.
8. Recipients must maintain records and documentation to support that the funds were used for permitted expenses and lost revenue consistent with the terms and conditions.
9. The funds do not have to be repaid provided that the funds were used as permitted and that the recipient complied with the applicable terms and conditions.
10. HHS has stated that it will have significant anti-fraud monitoring of funds distributed and that non-compliance with any term or condition is grounds for recoupment.

The application can be found here, and the application instructions can be found here.

On June 15^th, 2020, the Supreme Court ruled in a 6-3 decision that discrimination based on gender identity and sexual orientation is illegal under Title VII of the 1964 Civil Rights Act. Title VII of the Civil Rights Act of 1964 outlawed discrimination in the workplace on the basis of race, color, religion, sex, and national origin.

The decision stems from three cases in front of the Court where an individual employee in each case alleged unlawful discrimination by their employer on the basis of sex under Title VII. Two cases related to sexual orientation – Gerald Bostock was fired after participating in a gay recreational softball league for “conduct ‘unbecoming’ a county employee”, and Donald Zarda was fired days after mentioning he was gay. The third case was about gender identity – Aimee Stevens presented as male when initially hired and was fired after informing her employer she planned to live and work as a woman.

Delivering the opinion of the Court, Justice Neil Gorsuch said the Court was tasked with determining the ordinary public meaning of the terms of the statute at the time it was enacted, and the primary characteristic and term at issue and in dispute between the parties in these cases was the protected characteristic “sex”. The Court looked at what sex meant under the statute and what Title VII says about it – that the prohibition in the statute is on taking certain actions “because of” sex. As the employers in these cases suggested that Title VII is only concerned with discharges involving discrimination, the Court analyzed what discrimination meant in 1964 and determined it is roughly the same as today – that discrimination against an individual “seems to mean treating that individual worse than others who are similarly situated.” The Court further reasoned that no matter how it is analyzed, there is no way an employer can discriminate against homosexual or transgender individuals without discriminating in part based on the individual’s sex. Therefore, based on the ordinary public meaning at the time of the law’s adoption, the Court stated, “[A] straightforward rule emerges: An employer violates Title VII when it intentionally fires an individual employee based in part on sex.”

The Court ruled in favor of the three employees, holding, “[i]n Title VII, Congress adopted broad language making it illegal for an employer to rely on an employee’s sex when deciding to fire that employee. We do not hesitate to recognize today a necessary consequence of that legislative choice: An employer who fires an individual merely for being gay or transgender defies the law.”

WHAT DOES IT MEAN FOR EMPLOYERS & EMPLOYEES?

Federal law now protects employees against discrimination based on their gender identity and sexual orientation. Practically speaking for employers covered by Title VII (companies with 15 or more employees), what it means is that if gender identity or sexual orientation is the reason or one of the reasons for failure or refusal to hire an individual, a reason to discharge an individual or a reason for discrimination against an individual, it is illegal. At the time of the ruling, less than half of states had statutes with protections against employment discrimination based on gender identity and sexual orientation. Minnesota employees already had these protections under the Minnesota Human Rights Act.

Employers should ensure that their company policies and practices are in line with the Court’s decision. For questions or assistance regarding the requirements and best practices, please contact us.

On Wednesday, June 3, 2020, the Minnesota Supreme Court approved of the practice of litigation funding in the state, abolishing common law restrictions prohibiting third parties from covering all or part of the costs of litigating a case that had been in place for over 100 years. See Maslowski v. Prospect Funding Partners LLC, No. A18-1906. As described by the Court, litigation funding refers to “mechanisms that give a third party (other than the lawyer in the case) a financial stake in the outcome of the case in exchange for money paid to a party in the case.” The decision to allow the practice of litigation funding in Minnesota has the potential to significantly increase the number of commercial lawsuits filed in the state.

Litigation funding has grown in popularity in the last decade, internationally and in the United States. The Court pegged the value of this industry as approaching $100 billion. However, the practice is barred in many states due to ethics and public policy concerns related to third parties’ motivations for funding specific kinds of litigation. For example, the Minnesota Supreme Court noted that third-party funding was originally banned in England because it was used by those with means to play “the game of writs,” increasing their power and harassing rivals through the court system. In 1897, the Minnesota Supreme Court banned litigation funding (sometimes called maintenance or champerty), justifying the decision on the grounds that it would “prevent officious intermeddlers from stirring up strife and contention by vexatious or speculative litigation which would disturb the peace of society, lead to corrupt practices, and pervert the remedial process of the law.”

In its June 3 opinion, the Court reversed this 120+ year precedent, stating that the Rules of Professional Conduct and Rules of Civil Procedure now adequately address the risk of such abuses. The Court also recognized that litigation funding, like contingency fees, “may increase access to justice for both individuals and organizations.” Litigation funding may “allow plaintiffs who would otherwise be priced out of the justice system to assert their rights.”

Typically, plaintiffs seek out litigation funding as a way to cover the costs of a prospective lawsuit, but it can also be employed by defendants who assert counterclaims. According to one prominent litigation finance firm, third-party funding can offer would-be business plaintiffs numerous benefits, such as transfer of risk and freeing up of capital that would otherwise be spent on litigation, for outlays on business operations and capital investments.

So far, litigation funders have been primarily interested in commercial litigation. For example, litigation funders backed approximately 50% of federal class actions in Australia in the last 6 years, particularly in securities fraud cases. According to a survey of United States attorneys, 49% said they had used it in connection with intellectual property cases, 31% in connection with commercial litigation, and 15% in connection with unfair competition (false advertising) cases.

Based on the above trends, it can reasonably be anticipated that the Minnesota Supreme Court’s decision in Maslowski will likely lead to increased litigation in Minnesota, particularly in the commercial litigation sphere. The availability of litigation funding provides a potentially useful opportunity to businesses that possess claims against others. However, more plaintiffs means more defendants. This could affect underwriting relating to commercial liability covered by, for example, errors and omissions (E&O) insurance and directors and officers (D&O) insurance.

In a highly-anticipated move, on Tuesday Governor Walz issued Executive Order 20-51, which paves the way for resuming non-essential, elective procedures under certain specific requirements for prioritization of cases, preservation of PPE and infection control measures.  On March 23, 2020, Governor Walz had ordered that all non-essential and elective surgeries and procedures – medical and dental – that utilize ventilators or personal protective equipment (PPE) be postponed.

Now, effective May 11, 2020, veterinary, medical or dental procedures utilizing PPE or ventilators are permissible if the facility providing such services develops and implements an extremely detailed written plan following the specific requirements set forth in the Minnesota Department of Health (MDH) guidance entitled Requiring Facilities to Prioritize Surgeries and Procedures and Provide Safe Environment during COVID-19 Peacetime Emergency (“Plan Guidance”), which can be found here.

At a minimum, a Plan must adequately address seven areas, summarized below:

1. Prioritization of procedures: For each procedure, the Plan must require that the provider document an assessment of the risks and benefits associated with conducting the procedure during the pandemic based on that provider’s professional judgment.  Cases where delaying procedures places patients at higher risk must be prioritized.

2. Community considerations: Facilities are required to collaborate with other stakeholders and facilities in the same community, including the applicable regional health care coalition, to ensure adequate supplies and capacity are available in the event of a surge in COVID-19 cases without resorting to crisis standards of care.

3. Adequate screening and testing: The facility must develop protocols to screen all staff, patients and visitors for symptoms of COVID-19.  Notably, the facility must either develop a protocol for testing patients prior to conducting a procedure or assume that all patients are potentially COVID-19 positive and take all attendant precautions.

4. Use and supply of PPE: Facility staff must be trained and up-to-date on MDH, CDC and professional licensing board recommendations for PPE and must conduct routine compliance audits.  Procedures with a high risk for aerosol transmission must utilize appropriate protection (i.e., face shield and a N95 or higher respirator).

5. Commercial sources of PPE: The facility can only utilize commercial PPE supply chains for use in non-COVID-19 procedures and must have a sufficient reserve of PPE to account for potential commercial supply chain shortages and COVID-19 surges.

6. Social distancing and other infection prevention measures: The facility must implement protocols and physical measures to provide for social distancing, including requiring patients and visitors to wear facemasks, which the facility must be prepared to provide when necessary. 

7. Patient consultation: Each patient must be informed of the risks of COVID-19 transmission associated with the applicable procedure and that procedures are subject to cancellation on short notice. Facilities will need to develop new, compliant informed consent forms for patients.

Even though providers may understandably feel eager to resume treatment services as soon as possible, the creation and implementation of the required Plan utilizing the Plan Guidance should not be rushed or overly simplified.  MDH, state licensing boards and any other applicable state facility regulatory or licensing authorities will be monitoring compliance with the Plan Guidance and have authority to enforce this Order if a facility or provider fails to implement the Plan Guidance, fails to adhere to its Plan or retaliates against patients, visitors or staff who raise concerns regarding the Plan Guidance.  In addition, DLI may issue citations, civil penalties or even closure orders to facilities with unsafe or unhealthy conditions and may penalize employers that retaliate against workers who raise health and safety concerns.

This guidance is current as of May 5, 2020, at 5 pm Central Time. This is a rapidly-evolving situation and circumstances and guidance may change.

Minnesota’s stay at home order and social distancing measures have helped slow the spread of COVID-19 across the state. Recognizing the economic impact of these life-saving measures, especially for employees in non-critical sectors or without the ability to work from home, Governor Walz issued Executive Order 20-40, effective April 27, 2020, as a first step in the gradual process of reopening Minnesota businesses. EO 20-40 allowed some non-critical sector businesses to reopen beginning April 27, 2020, after these businesses planned for and provided a safe working environment. Executive Order 20-48, effective May 4, 2020, extended the stay at home order, but allows the non-critical industrial and office-based businesses included in EO 20-40 to stay open or reopen and allows certain retail businesses to reopen provided these businesses follow the health and safety guidelines and requirements.

This Alert provides a summary of these Executive Orders and guidance from several state and federal agencies on safely returning to work amid the COVID-19 pandemic.

NOTE: The information in this Alert is current as of May 4, 2020 at 5 pm Central Time. This is a rapidly-evolving situation and circumstances and guidance may change.

WHICH EMPLOYERS ARE ALLOWED TO REOPEN?

Recognizing that safely reopening Minnesota businesses will take time and monitoring, and that some business environments are more conducive to health and safety practices, EO 20-40 allowed certain non-critical sector industrial and office-based businesses to go back to work as long as these businesses did not directly interact with customers or the general public in their facilities. EO 20-48 maintains this and also allows retail businesses to operate if goods can be acquired without entering the place of business, such as with curb-side pickup. For the latest guidance on which businesses may reopen, see the Minnesota Department of Employment and Economic Development’s (DEED) “Guidance on Reopening Businesses”.

Non-critical businesses allowed to reopen include:

• Industrial and manufacturing businesses, including wholesale trade, warehousing, and places of employment in which goods are in the process of being created. The Department of Labor and Industry (DLI) lists examples including agriculture, forestry, fishing, hunting, mining, construction, utilities and manufacturing.
• Office-based businesses that are primarily not customer-facing where work is done within an office space primarily at desks.
• Retail stores and other businesses that are customer-facing and that sell, rent, maintain, and repair goods can engage in curbside or outside pick-up and delivery as long as customers are not entering the business premises. This includes pet grooming, repair services, household goods rental, maintenance services. Note that in order to provide delivery, the business must have provided delivery service pre-pandemic.

This does not include:

• Customer-facing retail environments associated with industrial and manufacturing businesses.
• Customer-facing retail environments associated with office-based businesses.
• Services in salons and barbershops. Salons and barbershops may only engage in pick-up or delivery retail product sales as outlined above and are not allowed to provide any services.
• Employees who are able to work from home – employees who can work from home must continue to do so and employers should encourage teleworking as much as possible.

See EO 20-48, the DEED’s Guidance on Reopening Businesses and the DEED’s FAQ’s regarding safely returning to work for more information.

WHAT CONDITIONS MUST EMPLOYERS MEET TO REOPEN?

These included businesses are allowed to reopen provided they are in compliance with the requirements of EO 20-48. All businesses permitted to reopen must:

• Develop and implement a written COVID-19 Preparedness Plan (the “Plan”) for each work place.
• Follow the health and safety protocols of EO 20-48, which include conducting daily health screenings of employees.
• Require work from home whenever possible, and should continue to work from home if already doing so.

COVID-19 PREPAREDNESS PLAN

As outlined in EO 20-48, a business’s COVID-19 Preparedness Plan must meet the following requirements, which will be addressed in turn below:

• Required Plan Content
  • Require work from home whenever possible
  • Ensure that sick workers stay home
  • Social Distancing
  • Employee hygiene and source control
  • Cleaning and disinfection protocols
• Optional template covering the above requirements (linked below)
• Certification and signature by senior management affirming commitment to implementing and following plan
• Dissemination and posting
• Training
• Compliance
• Availability to regulatory authorities and public safety officers

COVID-19 Preparedness

The Plan must also meet OSHA Standards related to workers exposed to COVID-19 and implement the guidelines from the Centers for Disease Control (CDC) and Minnesota Department of Health (MDH). An “Employer Preparedness Plan requirements checklist” and template “COVID-19 Preparedness Plan” are available to help businesses create a Plan that, at a minimum, contains the required core components. Businesses are not required to use the provided template, but adapting the provided template to fit the intricacies of the applicable business ensures that the Plan is compliant and effective. The Plan template includes links to relevant guidance for each core component of the plan, such as guidance on social distancing and housekeeping measures. These resources can be accessed here:

• COVID-19 Preparedness Plan – Word template | PDF template
• Employer Preparedness Plan requirements checklist – Word document | PDF document
• MN OSHA Compliance related to COVID-19, including Fact Sheets by industry

As listed in the Plan template, the Plan content should address the following key components:

• Hygiene and respiratory etiquette;
• Engineering and administrative controls for social distancing;
• Housekeeping – cleaning, disinfecting and decontamination;
• Prompt identification and isolation of sick persons;
• Communications and training that will be provided to managers and workers; and
• Management and supervision necessary to ensure effective implementation of the plan.

Minnesota OSHA is available to help businesses with questions about creating a Plan and compliance with applicable guidelines at MNOSHA Workplace Safety Consultation at 651-284-5060 or [email protected].

Implementation

Business senior management is responsible for implementing the Plan and must sign and certify it. This certification affirms that management is committed to implementing and following the plan.

Although the Plan does not need preapproval from any state agency, it must be available upon request by agencies including the DLI. The DLI has authority to determine whether the Plan is adequate, and to issue citations, civil penalties, and closure orders for non-compliant and unsafe businesses

Dissemination And Posting

The Plan must be implemented by management and must be provided to and reviewed by all workers. The Plan must be posted in all physical locations to be viewable by all workers. If a businesses is not able to post physical copies of the Plan or posting the Plan in certain locations is impractical, the Plan can be posted electronically if it is received by all workers and is available for them to review.

Training

Businesses must provide training related to the content and procedures in the business’s Plan. Businesses should also ensure that workers understand the requirement of the Plan and that all workers are able to follow and implement the required policies and procedures. Businesses must also provide adequate guidance and supervision. These training efforts must be documented and made available upon request by the DLI or other authorities.

Compliance And Enforcement

The Executive Orders designate authority to the DLI to evaluate the adequacy of a COVID-19 Preparedness Plan. As noted above, the Plan does not require preapproval from any state agency, but the plan must be made available upon request by the relevant authorities. Businesses should be diligent in documenting the implementation, dissemination, training, and compliance related to their Plan. Businesses may not be permitted to reopen or may be prohibited from continuing operations if they are found to be non-compliant with the CDC and MDH guidelines and OSHA requirements.

DAILY HEALTH SCREENINGS

Businesses must perform health screenings each day when employees enter the workplace to prevent sick workers from entering. The protocol for these screenings, including how reporting and isolating will take place, should be described and implemented in the Plan. Employers must be sure to comply with the ADA, the Rehabilitation Act, and Other Equal Employment Opportunity laws and maintain all data collected as protected under the ADA. Employers may disclose the name of employees with COVID-19 to public health agencies. See the U.S. Equal Employment Opportunity Commission’s “What you Should Know” for guidance and answers to FAQs.

Employers should ask and document answers to these questions related to symptoms of the COVID-19 virus. If employees answer yes to any of these questions, they should be asked to leave immediately:

• A new fever (100.4°F or higher), or a sense of having a fever?
• A new cough that you cannot attribute to another health condition?
• New shortness of breath that you cannot attribute to another health condition?
• A new sore throat that you cannot attribute to another health condition?
• New muscle aches that you cannot attribute to another health condition or a specific activity (such as physical exercise)?

MN Symptom Screener, a web-based health-screening and temperature tracking tool developed by Target and hosted by the Minnesota Safety Council, is now available at no cost to businesses. This tool can collect non-personal health information to help businesses make the required health screenings more effective and actionable. Target is also offering to Minnesota businesses a number of no-touch infrared forehead thermometers at cost here.

Employers are allowed but not required to take employees’ body temperatures according to the EEOC. The DEED advises businesses to be aware that not all people with COVID-19 have a fever.

This information is meant as a general guide to safely returning to work. We continue to monitor the situation and will update our Alert as additional guidance and resources become available. Please contact us for questions or specific guidance on implementing these requirements.

Yesterday, Treasury released an updated set of rules that finally provide guidance on how banks and other lenders participating in the SBA’s Paycheck Protection Program (“PPP”) can report disbursements of funds and collect on PPP processing fees.  The newly updated rules make it clear that any PPP lender must make a one-time disbursement of funds for a PPP loan within 10 calendar days of loan approval; loan approval is determined as of the date the SBA issues a loan number for the PPP loan.  For PPP loans that received an SBA loan number prior to yesterday, the 10 calendar day period begins as of April 28, 2020.

This guidance is important because the updated rules further clarified that the SBA is going to make available a specific SBA Form 1502 (the “Form”) which banks and other PPP lenders can use to report disbursement of PPP loans.  This in turn will allow PPP lenders to collect the processing fees for PPP loans funded by the PPP lender.  Lenders are required to electronically upload the Form within 20 calendar days after a PPP loan was approved by the SBA.  For those loans which had been approved prior to the issuance of the Form, the Form must be completed and uploaded for each such loan by May 18, 2020.

Once the Form has been uploaded, each lender needs to provide ACH credit information for direct payment of the processing fees and must confirm that all PPP loans for which processing fees are requested have been fully disbursed on the dates and in the loan amounts reported.  A lender will not receive a processing fee (1) prior to full disbursement of the PPP loan, (2) if the PPP loan is cancelled before disbursement, or (3) if the PPP loan was cancelled or voluntarily terminated and repaid after disbursement (including if the borrower repays the PPP loan proceeds to conform to the borrower’s certification regarding a necessity of the PPP loan request).

Winthrop & Weinstine, P.A. will continue to monitor the PPP Loan program and appropriate guidance from Treasury and the SBA as it is issued.  Should you wish to discuss any of the topics addressed above or other questions your organization may have as a result of the current environment, please feel free to contact our team.

If you were one of the thousands of small businesses who received a PPP loan in the initial wave of funding – or if you are still considering applying as part of the second wave – one of the key eligibility requirements for the loan substantively changed last week, at least according to the latest SBA guidance and public statements from other Federal officials. This is a troubling development for many borrowers, especially in light of the fact that $349 billion of loans have already been approved and funded, and many borrowers made important business decisions after receiving their loan funds.

In addition to certifying that the borrower is an eligible type of business for the program (i.e., 500 or fewer employees or otherwise considered a “small business” by the SBA’s standards), subject to other limited exceptions that we covered here, the PPP application also requires the borrower to certify in good faith that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.” Up until last week, the SBA had not provided any guidance on how to interpret this requirement. In the absence of any direction from the SBA, the conventional wisdom among borrowers and their advisors was that a PPP loan was “necessary” if the borrower believed that the loan proceeds would reduce the borrower’s need to lay off or furlough employees in order for the business to remain viable. This interpretation seemed to be consistent with, as the SBA has repeatedly described it, the CARES Act’s “overarching focus on keeping workers paid and employed.”

However, seemingly in response to negative press coverage regarding certain large publicly traded companies receiving PPP loans, the SBA issued an update to its frequently asked questions page with the following statement (excerpts quoted below with emphasis added):

“[B]efore submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”

This statement introduces even more questions than it answers. What are “other sources of liquidity”? What constitutes “not significantly detrimental to the business”? For example, if a borrower has access to loan proceeds from another lender, but on terms that are less favorable than the PPP loan terms, is the borrower required first to pursue that other source, even if those less favorable terms could impact the ongoing operations of the business? Is the loan “sufficient to support ongoing operations” if the borrower has not yet experienced a dramatic reduction in cash flow, but projects future operating losses given the overall state of the economy? Without additional clarifying guidance from the SBA, we do not have definitive answers to these questions. These new standards – and the timing of their issuance – are extremely frustrating to borrowers and their advisors who are struggling to interpret the SBA’s cryptic statements.

In public statements on Tuesday, Treasury Secretary Steven Mnuchin said the SBA will be doing a “full review” of loans in excess of $2 million before approving any loan forgiveness. For what it’s worth, the CARES Act already stated that the borrower’s forgiveness application was subject to the SBA’s approval, so it is unclear whether the “full review” contemplated by Sec. Mnuchin will actually be more rigorous than the regular approval process outlined in the CARES Act.

At the very least, the SBA’s new position introduces a level of uncertainty for (1) borrowers who may have access to other, non-PPP sources of capital, including retained earnings and other lending sources, and (2) businesses who have not experienced a significant loss in revenue as a result of the COVID-19 pandemic.

In a nod to the fact that it moved the goalposts on thousands of borrowers who already received a PPP loan, the SBA is providing a safe harbor of sorts. If a PPP recipient determines, based on this new guidance, that the loan should not have been certified as “necessary” and then repays the loan in full by May 7, 2020, the borrower will be deemed by the SBA to have made the required certification (i.e., on the initial loan application) in good faith and the individual who signed the application will be immune from potential criminal prosecution.

These recent developments are particularly concerning for PPP borrowers with a healthy (or even “middle of the road”) balance sheet. Many businesses who certified their PPP applications in good faith are now left wondering exactly how the SBA expects them to demonstrate the basis for that certification and what risks they face by keeping their PPP loan proceeds. In addition to the risk of a government audit or criminal liability for knowingly making a false certification on a PPP loan application, some larger companies are also justifiably concerned about a potential public relations backlash over their receipt of PPP funds (even if they can comfortably certify in good faith that the loan was “necessary” under the new SBA guidance). Ultimately, this is a risk-reward business decision for any company in a grey area, where almost every PPP borrower seems to find itself given the current guidance.

With the rules and program constantly evolving and guidance in the form of the FAQs being updated at random, we are vigilantly monitoring the situation. For businesses who have concerns about these issues, please reach out to us to discuss.

For additional information and resources related to the Paycheck Protection Program, visit our COVID-19 Resource Center.

The Federal Reserve (the “Fed”) announced the establishment of a $600 billion Main Street Lending Program (the “Program”) to support lending to small and medium-sized businesses impacted by the COVID-19 pandemic. The funds were appropriated under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Program will be comprised of two lending facilities (the “Facilities”), the Main Street New Loan Facility (“MSNLF”) and the Main Street Expanded Loan Facility (“MSELF”).  Eligible Lenders (as defined herein) may originate new loans under MSNLF or increase the size of (or “upsize”) existing loans under MSELF to Eligible Borrowers (as defined herein).

Both MSNLF and MSELF offer potentially advantageous lending arrangements which could be used by lenders and borrowers in connection with: (a) the restructuring of existing loan facilities negatively impacted by the COVID-19 pandemic; and (b) forbearance and work-out with respect to existing loan facilities negatively impacted by the COVID-19 pandemic. But the term sheets for MSNLF and MSELF currently raise many questions and issues about terms of implementation. It is expected that additional guidance will come from the Fed and the United States Treasury (the “Treasury”) over the coming weeks.

The SPV

The Treasury will make a $75 billion equity investment from CARES Act funds in a special purpose vehicle (“SPV”). This equity investment will to enable up to $600 billion in liquidity commitments from the Fed. Under both Facilities, the Fed will commit to lend to the SPV and the SPV will then purchase 95% of the eligible loans (for MSELF, this means 95% of the increased amount of the existing loan) until September 30, 2020. Eligible Lenders will retain 5% of each eligible loan, with the risk shared on a pari passu basis between the SPV and the Eligible Lender.

Eligible Lenders

Eligible Lenders will originate and service the loans under the Facilities. Currently, “Eligible Lenders” for these Programs are: (1) U.S. insured depository institutions; (2) U.S. Bank Holding Companies; and (3) U.S. savings and loan holding companies.

Eligible Borrowers

Currently, “Eligible Borrowers” include businesses and non-profits with either a maximum of 10,000 employees or not more than $2.5 billion in 2019 annual revenue; however, a minimum size requirement has not been established.  The business must be created or organized in the United States or under the laws of the United States with significant operations and a majority of its employees based in the United States. Currently, there is no limit of foreign ownership of a US entity.  An Eligible Borrower cannot be a debtor in a bankruptcy proceeding.  An Eligible Borrower must also have been impacted by the COVID-19 pandemic. An Eligible Borrower under the Program may be a recipient of a Paycheck Protection Program (PPP) loan, however, such borrower may not participate in both MSNLF and MSELF. Borrowers who participate in the Primary Market Corporate Credit Facility may not participate in MSNLF or MSELF.

Eligible Loans

For MSNLF, eligible loans are those originated on or after April 8, 2020. All loans under MSNLF must be unsecured. For MSELF, eligible loans are term loans that originated before April 8, 2020 and have been subsequently upsized. An Eligible Borrower who has an existing loan with an Eligible Lender may choose to either upsize the existing loan using the MSELF program or enter in to a new loan under the MSNLF program.

General Loan Terms – applicable to both MSNLF and MSELF (for MSELF, applicable to “upsized tranche”)

• Minimum loan size is $1 million
• 4 year maturity (presumably amortized in equal principal installments over the final 3 years)
• Adjustable rate: SOFR + 250-400 bps
• Amortization of principal and interest deferred for 1 year
• No prepayment penalty
• Not eligible for forgiveness
• Lenders may charge borrower an origination fee of 100 bps on the full principal amount of the loan
• The SPV pays lenders a servicing fee of 25 bps per annum on the principal balance of the participation

Restrictions/Requirements on Recipient of Loan Funds

• Borrower must attest that it requires financing due to exigent circumstances presented by the COVID-19 pandemic
• Limits (to be further defined) on use of loan proceeds for paying existing loans and other debt of equal or lower priority
• Existing lender cannot reduce or cancel existing lines of credit; Borrower cannot seek to cancel or reduce any existing lines of credit
• Borrower must use loan proceeds to make reasonable efforts to maintain payroll and employees during the loan term
• Borrower must attest to 2019 EBITDA leverage requirements
• Borrower must intend to restore at least 90% of its employees who were employed on February 1, 2020 and all compensation and benefits to its employees not later than 4 months after the end of the public health emergency related to COVID-19 pandemic
• Borrower will not outsource or offshore jobs until 2 years after the loan is repaid
• Limits on compensation, distributions and stock repurchases
• Borrower and lender must provide certifications regarding no conflict of interest

Key Differences Between MSNLF and MSELF

• Collateral
  • MSNLF – unsecured
  • MSELF – any collateral securing an eligible loan (whether pledged under the terms of the original loan or at the time of upsizing), will secure the loan participation on a pro rata basis; additional collateral requirements are at the discretion of lender
• Loan Origination
  • MSNLF – Must be a new loan originated after April 8, 2020
  • MSELF – Must be expansion of existing term loan originated before April 8, 2020
• Maximum loan amounts
  • MSNLF – the maximum loan is $25 million, but after loan is made, borrower’s total debt (including committed but undrawn debt) may not exceed 4 x borrower’s 2019 EBITDA
  • MSELF – the maximum size of the expanded portion of the loan is the lesser of: (i) $150 million, or (ii) 30% of the borrower’s existing outstanding and committed, but undrawn bank debt, but in any event, after loan is made, borrower’s total debt (including committed but undrawn debt) may not exceed 6 x borrower’s 2019 EBITDA

• Facility Fees
  • MSNLF – Lender to pay the FED SPV a “facility fee” of 100 bps of principal amount of loan participation purchased by SPV (may be passed on the Borrower)
  • MSELF – no facility fees

On April 15, 2020, Minnesota Governor Tim Walz signed into law new legislation related to COVID-19.  Among many other provisions, the legislation includes a relaxation of the normal formalities for signing a Will by including a “Harmless Error” provision.

Typically, in order for a person to create a Will, two witnesses must be present to witness the person’s signature (or someone signing on that person’s behalf), the acknowledgement of the signature, or the acknowledgement of the Will.  The new legislation provides that a document can properly count as a Will (or codicil, revocation or revival) if clear and convincing evidence establishes that the decedent intended for the document to be such.

What this means in practice is that there is an avenue to allow an un-witnessed Will to be deemed valid.  However, it is still less than ideal, and should only be used if witnesses truly cannot be used.  That’s because demonstrating by clear and convincing evidence that an intended Will should fall under the harmless error exception requires a formal probate proceeding, so that evidence can be properly presented.  Any documents signed under the harmless error exception would ideally be redone at a later date with complete formalities, in order to avoid a formal probate.

This change to current law is not permanent.  It only applies to documents executed on or after March 13, 2020, but before February 15, 2021.

For those who have delayed completing estate planning documents because of a concern about having witnesses present, we recommend proceeding with your documents now, and revisiting them when proper formalities can be used.  Other estate planning documents (trusts, powers of attorney and health care directives) have their own requirements for full execution, but there are options available to put in place as close to a full estate plan as is possible now.

For more information or help making changes to your estate plan, please feel free to contact a member of Winthrop & Weinstine’s Trust and Estates team.