CARES Act Resource Center

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On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The information published in the CARES Act Resource Center discusses:

  • 7(a) Paycheck Protection Program Loans
  • 7(b) Economic Injury Disaster Loans and the $10,000 Emergency Grant
  • Employer Payroll Tax Delay
  • Employee Retention Payroll Tax Credit
  • The Telehealth Program
  • Main Street Lending Programs
  • And more!

If you have questions about your business, its eligibility to participate in any of the loan programs, issues concerning business operations and available financial programs, or related enforcement, please do not hesitate to contact the lawyers at Capes Sokol.

During these uncertain times, you can be certain of Capes Sokol’s commitment to serve you during the COVID-19 Crisis.

Resources

“Small Business” Loan Types

Historically, the Small Business Administration (the “SBA”) has offered 7(a) Business Loans and 7(b) Disaster Loans. After the passage of the CARES Act on Friday, March 27, 2020, these two loan programs became temporarily amended to provide easier barriers of entry. While FAQs and an Interim Final Rule have been released, there is still much that awaits further clarification. Though on April 16, 2020, funding for the two loan programs had run up, additional funding is expected. As such, it is important to familiarize oneself with the various nuances of the two programs to determine eligibility. Thus far, this is what we know about the two loan programs:
ELIGIBILITY →AFFILIATION RULES →TERMS OF THE LOAN →LOAN AMOUNT →LOAN USES →APPLICATION PROCESS →
7(A) Paycheck Protection Program7(B) Economic Injury Disaster Loan
If each of the following applies to your business, your business (as a for-profit or as a 501(c)(3)) is eligible:
  1. no more than 500 employees (unless your business’ industry type on the size chart found here allows a greater maximum number of employees)* AND
  2. was in operation as of February 15, 2020 AND
  3. had employees it was paying salaries and payroll taxes to.
*This number could be effected by any of the business’ affiliates

**Additionally, a business can qualify for the Paycheck Protection Program as a small business concern if it meet both tests in SBA’s “alternative size standard” as of March 27, 2020: (1) maximum tangible net worth of the business is not more than $15 million AND (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million 		So long as your business has been in operation since January 31, 2020, if one of the following applies to your business, your business is eligible:
  1. no more than 500 employees* OR
  2. a “small business” as determined by the size chart found here* OR
  3. a “private nonprofit organization” (essentially a state-registered nonprofit) of any size
*This number could be effected by any of the business’ affiliates.
7(A) Paycheck Protection Program7(B) Economic Injury Disaster Loan
“Payrolls costs” x 2.5 + outstanding amount of 7(b) loanBased on the business’ actual economic injury and financial needs. In essence, the loan is meant to provide working capital that is necessary to resume normal operations and for expenditures necessary to alleviate the economic injury (but not meant to exceed that which the business could have provided had the injury not occurred).
7(A) Paycheck Protection Program7(B) Economic Injury Disaster Loan
  • Yes: payroll costs, group health benefits, sick, medical, or family leave, insurance premiums, employees salaries, payment of interest on mortgage, rent, utilities, and interest on any other debt (incurred prior to February 15, 2020)
  • No: principal mortgage payments, principal on any other debt
  • Yes: fixed debts, payroll, accounts payable, and/or other obligations that cannot be paid as a result of the coronavirus disaster
  • No: refinancing debt, making payments on loans owed by another federal agency, paying tax penalty obligations, repairing physical damages, and/or paying dividends to stockholders
7(A) Paycheck Protection Program7(B) Economic Injury Disaster Loan
The application process will be through an SBA approved lender. The SBA has released the borrower application here: Paycheck Protection Program Borrower Application Form

No personal guarantee or collateral is required.		A business only needs to fill out the application through the SBA online portal here: COVID-19 Economic Injury Disaster Loan Application

Note, since this loan is administered though the SBA, while the SBA may elect to approve a business purely based on the business’ credit score (without requiring a tax return), it could also require a business to fill out further forms.

Personal guarantee may be required for loans in excess $200,000.
Operating Phase OneOperating Phase TwoOperating Phase Three
  • Consider resuming only the most critical in-person proceedings; restrict grand and petit jury proceedings to only the most extraordinary and pressing cases (the Court intends to issue directives on conducting jury proceedings as pandemic conditions improve).
  • Large venues and common areas should remain closed. Room occupancy should be kept to 10 or fewer people, and strict social distancing protocols should be observed. Consider the use of face coverings. Tape should be used to mark six-foot distances where practical.
  • Vulnerable persons, as defined by the CDC, should be permitted to take part in proceedings remotely or postpone their required presence.
  • Encourage judges and staff to continue utilizing conferencing technology whenever possible to limit in-person courtroom appearances, if not prohibited by constitutional or statutory provisions.
  • Suspend non-essential travel by judicial employees for work-related functions.
  • Vulnerable judicial employees, or those employees who live with vulnerable persons, should work with supervisors to stay at home.
  • Implement screening whenever possible at facility entrances to mitigate the entrance of individuals experiencing COVID-19 symptoms. This could include temperature checks or screening questions.
  • Increase cleaning and disinfection of common areas; consider providing hand sanitizer or wipes.
  • Increased in-person proceedings, including the most extraordinary, pressing, and urgent grand and petit jury proceedings, can begin if they can be safely conducted in compliance with social distancing and occupancy limitations applicable to the local community.
  • Occupancy rates in large venues and common areas such as courtrooms, jury assembly rooms, and others at 25 or less whenever possible. Operate under social distancing protocols. Consider requiring the use of face coverings. Require tape to mark six-foot distances when practical.
  • Continue to allow vulnerable persons in court proceedings to participate remotely or postpone their required presence at the court facility.
  • Continue to encourage judges and staff to continue utilizing conferencing technology where possible to limit in-person courtroom appearances, if not prohibited by constitutional or statutory provisions.
  • Continue to suspend non-essential travel by judicial employees for work-related functions.
  • Vulnerable judicial employees should work with supervisors to establish reasonable accommodations for those vulnerabilities.
  • Judicial employees should be permitted to stay at home if ordered to self-quarantine, living with or caring for such an individual, considered high risk for contracting COVID-19, or experiencing symptoms and seeking a medical diagnosis.
  • Continue to implement screening whenever possible at facility entrances to mitigate the entrance of individuals experiencing COVID-19 symptoms. This could include temperature checks or screening questions.
  • Continue increased cleaning and disinfection of common areas; consider providing hand sanitizer or wipes.
  • Resume in-person court proceedings, including grand and petit jury proceedings, that can be conducted in compliance with social distancing protocols and occupancy rate limitations applicable to the local community.
  • Large venues and common areas can operate under social distancing protocols. Consider requiring the use of face coverings and consider allowing vulnerable individuals involved in court proceedings to participate remotely or postpone their required presence.
  • Continue to encourage judges and staff to continue utilizing conferencing technology where possible to limit in-person courtroom appearances, if not prohibited by constitutional or statutory provisions.
  • Consider terminating enhanced screening procedures at court facility entrances.
  • Continue cleaning and disinfection of common areas and consider providing hand sanitizer and wipes.
  • Allow vulnerable judicial employees to return to work but encourage supervisors to make reasonable accommodations to address those vulnerabilities.
  • Consider discontinuing the suspension of non-essential work travel for judicial employees.
  • Allow judicial employees to stay home if the employee is subject to quarantine order, or living with or caring for an individual under such an order, or has been advised by a health care provider to self-quarantine, or is experiencing COVID-19 symptoms and seeking medical diagnosis or living with such an individual.
A court cannot proceed to the next phase until it has completed at least 14 days in each phase. Additionally, the court must reevaluate the Gateway Criteria.
OrderDateSummaryLink
Statewide Restrictions on In-Person Proceedings to be Eased as of May 16May 4, 2020
The Supreme Court of Missouri issued an order, which will go into effect on May 16, providing guidance to lower courts for easing the current COVID-19 restrictions. This order was issued in response to state and local governments beginning the process of easing stay-at-home and social distancing restrictions. The new order supersedes the Court’s previous order regarding COVID-19 dated April 17, 2020, which placed statewide restrictions on in-person proceedings, and will remain in effect until rescinded or amended by the Court. This order is applicable to all appellate and circuit courts, including associate, family, juvenile treatment, municipal, and probate divisions. Under this order, court activity in these courts shall be limited and restricted pursuant to certain Operational Directives (discussed below). Under the order, courts and judges are still encouraged to utilize available conferencing technology to conduct court activities remotely and limit in-person proceedings. To that end, any local, criminal, or civil rules that would impede the ability to utilize such technologies remain suspended. Additionally, judges presiding over civil matters may exercise discretion to waive, for good cause shown, any filing deadlines not set by a statutory or constitutional provision. Lastly, access to court buildings is still prohibited for individuals who have been exposed to or are exhibiting symptoms of COVID-19.

Summary of Court’s Statewide Operational Directives for Easing of COVID-19 Restrictions

The Court recognizes that conditions, and the appropriateness of precautions, will vary across the state. As such, the Operational Directives are intended to provide flexibility, while maintaining some uniformity in approach as courts gradually resume activities previously suspended. Per the order, all courts will continue operating under their current conditions (which the Court refers to as “Operating Phase Zero”). From there, the presiding judge of each court will determine, in light of certain criteria (the “Gateway Criteria”), that improvements in local conditions warrant moving to a less restricted operational phase—or reverting back to a more restricted operational phase. Operating Phase Zero is the most restricted phase, and the Court has established three (3) less restricted operating phases (“Operational Phase 1-3”).

Gateway Criteria

Before resuming suspended court activities or progressing to a new operating phase, the following Gateway Criteria must be considered:
  1. No confirmed COVID-19 cases in the court facility within a 14-day period.
  2. Rescission or lack of stay-at-home orders or relaxing of group gathering restrictions.
  3. Improving COVID-19 health conditions over a 14-day period in the community, including conditions such as the number of confirmed cases, related deaths in relation to population density, size of particularly vulnerable populations, and availability of medical facilities including emergency and intensive care capacity.
  4. Consultation with local health officials concerning changes to levels of court activities.
  5. Consultation with local judiciary partners such as children’s division personnel, juvenile officers, members of the local bar, prosecutors and public defenders, law enforcement, probation and parole.
If the Gateway Criteria suggest local conditions are improving sufficiently, the presiding judge “may” move to a higher operating phase. If conditions are worsening, or there is a resurgence of COVID-19 cases, the judge “should” move to a lower operating phase, including, if necessary, a return to Operating Phase Zero. Any movement to a higher or lower operating phase should be accompanied by policies protecting litigants, witnesses, victims, judicial employees, attorneys, and others involved in judicial proceedings through social distancing, occupancy rate restrictions, building access restrictions for COVID-19 exposed persons, use of face coverings, heightened sanitation, sick employees staying home, liberal work-from-home policies, and preparation for the resurgence of COVID-19 cases. In each operating phase, the courts should continue to rely on local health officials, CDC guidance, and consult with local judiciary partners, and reexamine and update local orders and notices as appropriate.
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Order Effective May 4, 2020
Extended Deadlines for Court Reporter Continuing EducationMay 1, 2020The Supreme Court of Missouri extended deadlines for continuing education for court reports. The reporting year for 2019-2020, which is now the 15 months between July 1, 2019 and September 30, 2020. The reporting deadline will be extended until October 31, 2020.Order Effective May 1, 2020
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Main Street Lending Programs

Mid-Sized Businesses, The CARES Act Care(s) About You!
On April 9, 2020, the Federal Reserve, published term sheets for a Main Street Lending Program for small and/or mid-size businesses. There are actually two separate loan programs under the Main Street Lending Program—the Main Street Lending Program and the Main Street Expanded Lending Program. On April 30, 2020, after receiving and reviewing public input, the Federal Reserve made adjustments to the Main Street Lending Program and Main Street Expanded Lending Program and added a third loan option (though the Federal Reserve will only purchase 85% of this loan). The proposed terms of the programs are similar (aside from the loan amount and the collateral required) and are outlined below:
ELIGIBILITY REQUIREMENTS →OTHER ELIGIBILITY REQUIREMENTS →TERMS OF THE LOAN →LOAN AMOUNT →CERTIFICATIONS →APPLICATION PROCESS →
New Lending ProgramPriority Lending Program Expanded Lending Program
From $250,000 up to the lesser of (i) $35 million or (ii) an amount that, when added to the business’ outstanding and committed, but undrawn debt, does not exceed four times the business’ 2019 EBITDA (earnings before interest, taxes, depreciation, and amortization)From $250,000 up to the lesser of (i) $50 million or (ii) an amount that, when added to the business’ outstanding and committed, but undrawn debt, does not exceed six times the business’ 2019 EBITDAFrom $10 million up to the lesser of (i) $300 million or (ii) 35% of the borrower’s existing outstanding and committed, but undrawn bank debt or (iii) an amount that, when added to the business’ outstanding and committed, but undrawn debt, does not exceed six times the business’ 2019 EBITDA
New Lending ProgramPriority Lending Program Expanded Lending Program
CARES Act Section 4003(c)(3)(D) requires borrowers to make the following certifications:
  • The “uncertainty of the economy as of the date of the loan application necessitates the need for the loan in order to support ongoing operations”;
  • Loan proceeds will be used to retain at least 90% of the borrower’s workforce (at full compensation and benefits) until September 30, 2020;
  • The borrower intends to restore not less than 90% of its workface that existed as of February 1, 2020 (and to restore all compensation and benefits to its workers no later than 4 months after the COVID-19 health emergency is declared over);
  • The borrower is domiciled and organized in the United States;
  • The borrower has significant operations and a majority of its employees in the United States and will not outsource jobs offshore for the term of the loan plus 2 years after repayment;
  • The borrower is not a debtor in a bankruptcy proceeding;
  • Any publicly traded borrower will not pay dividends to common stockholders (or repurchase any of its or its parents’ stock, unless required under a contractual obligation that exists prior to March 27, 2020);
  • The borrower will not abrogate existing collective bargaining agreements for the term of the loan plus 2 years after repayment; AND
  • The borrower will remain neutral in any union organizing effort for the term of the loan.
In addition to the above, the Federal Reserve requires the following certifications:
  • The business will not pay the principal or interest on any other debt, with the exception of (i) mandatory principal and interest payments and (ii) new and/or existing obligations that are required in the normal course of the business and on standard terms (for Priority Loans only, the borrower may refinance existing debt at the time the Priority Loan is originated);
  • The business will not cancel or reduce any existing lines of credit with any lender (unless repaying a line of credit in the business’ normal course of business);
  • The business must have a reasonable basis to believe that, as of the date of origination of the loan and after giving effect to such loan, it has the ability to meet its financial obligations for at least the next 90 days and does not expect to file for bankruptcy during such time;
  • For the term of the loan and for a period of one year thereafter:
    • Neither the business nor any parent company (or, in specified industries, an “affiliate”) will make purchases of publicly traded securities, except to the extent required under a contractual obligation that is in effect as of March 27, 2020;
    • The business will not pay any dividends or make any distributions with respect to the common stock of the business;
    • Officers or employees with more than $425,000 in total compensation (including bonuses, equity awards, and other financial benefits) in 2019 cannot receive an increase in their annual total compensation nor severance benefits in an amount greater than twice what they were entitled to in 2019; AND
    • Officers or employees with more than $3,000,000 in total compensation (including bonuses, equity awards, and other financial benefits) in $2019 will be limited to the sum of $3,000,000 plus 50% of the amount in excess of $3,000,000 received in 2019.
New Lending ProgramPriority Lending Program Expanded Lending Program
Businesses may apply through September 30, 2020 with a start date to be announced soon.
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, BrandsTake the AUNT JEMIMA trademark for syrup and pancake mix, which dates to the 19th Century, was formally registered as a U.S. Trademark in 1905, and originally featured a Black woman dressed as a minstrel character. (Website/CBS Austin)
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, BrandsOr the UNCLE BEN’S trademark and logo, first used in commerce back in 1937 and featuring an elderly Black man in a bowtie, apparently based upon the image of a popular waiter in a Chicago restaurant. (Website/NY Daily News)
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, BrandsOr LAND O’ LAKES, the Minnesota-based dairy company whose butter package had, for nearly a century, featured a Native American woman kneeling against a background of green pine trees and a blue lake. (Website/Twin Cities)
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, BrandsOr, of course, the WASHINGTON REDSKINS, a registered trademark for nearly seventy years and a lucrative brand that has generated millions of dollars for the NFL football team in sales of apparel and other merchandise. (Website/Los Fresnos News)
DefinitionCarefully review the definition of force majeure in that contract.  Does it specifically mention pandemics?  If not, is there another event expressly identified which incorporates events such as COVID-19 and/or its related repercussions (e.g., “acts of government” or “quarantine restrictions”)?  If not, is there general language sufficient to include COVID-19 and/or its related repercussions?
CausationConsider what contractual obligation is not able to be performed and then determine whether the failure to perform this obligation is due to the direct or indirect consequences of COVID-19 as opposed to a different reason.  If it is not, the force majeure provision is likely not applicable.
MitigationConsider whether the party claiming an inability to perform under the contract (i) followed all official guidance; and (ii) took commercially reasonable efforts to perform in a different manner or to otherwise mitigate the effect of the force majeure event.  If the party did not take these actions, it may be harder for such party to rely on the force majeure provision. If you are the party claiming an inability to perform, be sure to maintain records of your efforts to prevent or mitigate the impact of COVID-19 on your ability to perform.
Notice RequirementsDoes the contract contain a notice requirement?  If so, consider whether a certain notice must be provided in order to allow reliance on the force majeure provision.  You should also be aware of any related timing requirements or requirements related to how/where such notice is delivered.
ConsequencesEvaluate the consequences of a successful claim for force majeure.  For example, does the provision excuse performance or merely allow for a delay in performance equal to the number of days of the force majeure event.  Alternatively, some clauses may provide a right to source from an alternate provider or to terminate the contract for non-performance after a certain period of time.
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, Brands

(Website/CBS Austin)

Take the AUNT JEMIMA trademark for syrup and pancake mix, which dates to the 19th Century, was formally registered as a U.S. Trademark in 1905, and originally featured a Black woman dressed as a minstrel character.
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, Brands

(Website/NY Daily News)

Or the UNCLE BEN’S trademark and logo, first used in commerce back in 1937 and featuring an elderly Black man in a bowtie, apparently based upon the image of a popular waiter in a Chicago restaurant.
COVID-19, Covfefe, Black Lives Matter, Washington Redskins, Aunt Jemima, Uncle Ben’s, Trademarks, Intellectual Property, Brands

(Website/Twin Cities)

Or LAND O’ LAKES, the Minnesota-based dairy company whose butter package had, for nearly a century, featured a Native American woman kneeling against a background of green pine trees and a blue lake.
Or, of course, the WASHINGTON REDSKINS, a registered trademark for nearly seventy years and a lucrative brand that has generated millions of dollars for the NFL football team in sales of apparel and other merchandise.
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Questions?
If you have questions about your business, its eligibility to participate in any of the loan programs, or another issue concerning business operations and available financial programs, please do not hesitate to contact the lawyers at Capes Sokol.

CARES Act Resource Center Team

Laura E. Krebs Al-Shathir

Shareholder

P: 314.505.5424
E: alshathir@capessokol.com

R. Thomas Avery

Shareholder

P: 314.505.5404
E: avery@capessokol.com

Douglas S. Dove

Managing Shareholder

P: 314.505.5460
E: dove@capessokol.com

John S. Meyer Jr

Senior Counsel

P: 314.505.5442
E: meyer@capessokol.com

Brian J. Sabin

Shareholder

P: 314.505.5426
E: sabin@capessokol.com