Item 1.01 Entry into a Material Definitive Agreement.
Paycheck Protection Program Loan
On July 24, 2020, U.S. Well Services, LLC (the “Borrower”), a wholly owned subsidiary of U.S. Well Services, Inc. (the “Company”), entered into a Promissory Note (the “Note”) with Bank of America, N.A., as lender, pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (as amended by the Paycheck Protection Program Flexibility Act of 2020 and as otherwise amended from time to time, the “CARES Act”), in the aggregate principal amount of $10,000,000 (the “PPP Loan”).
The Note matures on July 24, 2025 and bears interest at a rate of one percent (1%) per annum. Monthly principal and interest payments will commence following the end of the Deferment Period (as defined in the PPP Loan). The Borrower may prepay the principal of the PPP Loan at any time without a prepayment penalty. Proceeds of the PPP Loan will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the rules and guidance issued by the U.S. Small Business Administration (“SBA”) implementing the PPP under Division A, Title I of the CARES Act. Under the terms of the PPP, up to the entire amount of principal and accrued interest may be forgiven to the extent the PPP Loan proceeds are used as described in the CARES Act and applicable issuing guidance issued by the SBA under the PPP. The Company intends that the Borrower would use its entire PPP Loan for designated qualifying expenses and to apply for forgiveness in accordance with the terms of the PPP. No assurance can be given that the Borrower will obtain forgiveness of the PPP Loan in whole or in part.
The Borrower did not provide any collateral or guarantees for the PPP Loan, nor did the Borrower pay any facility charge to obtain the PPP Loan. The Note provides for customary events of default, including, among others, those relating to bankruptcy, failure to make payments, breaches of representations and material adverse effects.
The lender under the Borrower’s ABL Credit Agreement dated May 7, 2019 consented to the Borrower’s incurrence of the PPP Loan.
The foregoing description of the Note does not purport to be complete and is qualified in its entirety by reference to the full text of the Note, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Third Amendment to Senior Secured Term Loan Credit Agreement
On July 30, 2020, the Borrower, the Company and the subsidiary guarantors party thereto (collectively, the “Loan Parties”), entered into a Third Amendment to Senior Secured Term Loan Credit Agreement (the “Term Loan Amendment”) with CLMG Corp., as administrative agent (the “Administrative Agent”), CLMG Corp., as collateral agent (the “Collateral Agent”, and together with the Administrative Agent, the “Agents”) and the lenders party thereto (the “Lenders”). The Term Loan Amendment amends that certain Senior Secured Term Loan Credit Agreement, dated as of May 7, 2019 (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”), among the Loan Parties, the Agents, the Lenders, and certain other financial institutions party thereto from time to time.
Pursuant to the Term Loan Amendment, the Agents and the Lenders agreed to make certain modifications and amendments to the Credit Agreement in order to, among other things, consent to the entry into the PPP Loan, subject to the amended terms and conditions specified for the same in the Term Loan Amendment.
Additionally, the Term Loan Amendment made certain modifications to the Credit Agreement which limit the Loan Parties’ ability to deploy and use collateral outside of the continental United States and other than in connection with oil and gas fracking and exploration without the prior consent of the Administrative Agent. In the Term Loan Amendment the Loan Parties further agreed to specific conditions and covenants regarding a turbine rental and services agreement entered into on June 19, 2020 and which affect the equipment which is the subject thereof.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The information in Item 1.01 and Exhibit 10.1 of this Current Report on Form 8-K are incorporated herein by reference into this Item 2.03.
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