THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND WAIVER

 

THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this
“Amendment”), dated as of August 12, 2019, is entered into by and between
ENSERVCO CORPORATION, a Delaware corporation, DILLCO FLUID SERVICE, INC., a
Kansas corporation, HEAT WAVES HOT OIL SERVICE LLC, a Colorado limited liability
company, HEAT WAVES WATER MANAGEMENT LLC, a Colorado limited liability company,
and ADLER HOT OIL SERVICE, LLC, a Delaware limited liability company
(collectively, “Borrowers”), on the one hand, and EAST WEST BANK, a California
banking corporation (“Lender”), on the other hand, with reference to the
following facts:

 

RECITALS

 

A.     Borrowers and Lender previously entered into that certain Loan and
Security Agreement, dated as of August 12, 2017, as amended by the First
Amendment to Loan and Security Agreement dated as of November 20, 2017 and the
Second Amendment to Loan and Security Agreement dated as of October 26, 2018
(collectively, the “Loan Agreement”), pursuant to which Lender provides certain
loans and other credit accommodations to Borrowers.

 

B.     An Event of Default occurred under Section 8.1 of the Loan Agreement as a
result of Borrowers’ breach of Section 2.1(b)(i) of the Loan Agreement by
failing to repay immediately upon Lender’s election and demand the Overadvance
in the approximate amount of $753,491 that occurred on July 1, 2019 and
continued through July 3, 2019. (Such Event of Default hereinafter is referred
to as the “Existing Event of Default.”)

 

C.     Borrowers have requested that Lender waive the Existing Event of Default,
which Lender is willing to do subject to the terms and conditions set forth
below.

 

D.     Borrowers and Lender also wish to amend the Loan Agreement as set forth
herein.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.     Defined Terms. All capitalized terms used in this Amendment (including,
without limitation, in the recitals hereto) without definition shall have the
respective meanings specified in the Loan Agreement.

 

2.     Waiver of Existing Event of Default. Lender hereby waives the Existing
Event of Default. This limited waiver shall not be deemed to amend or alter in
any respect the terms and conditions of the Loan Agreement, the obligations of
Borrowers to Lender thereunder or under any other Loan Document, or to
constitute a waiver or release of Lender of any right, remedy or Event of
Default under the Loan Agreement or any other Loan Document, except to the
extent specifically set forth herein. Furthermore, this waiver shall not affect
in any manner whatsoever any rights or remedies of Lender with respect to any
other non-compliance by Borrowers with the Loan Agreement or any other Loan
Document, whether in the nature of an Event of Default or otherwise, and whether
now in existence or subsequently arising.

 

3.     Amendment of Interest Rates Provision. Section 2.2(a) of the Loan
Agreement is hereby amended and restated to read in full as follows (deleted
text is indicated by strikethrough formatting; added text is indicated in bold,
italicized and underscored type):          

     “(a)     Interest Rates.     Except as set forth in Section 2.2(b), each
Revolving Advance shall bear interest, on the outstanding daily balance thereof,
at Borrowers’ option, either (A) if such Revolving Advance is a Prime Rate Loan,
at a variable rate per annum equal to, as applicable, (i) if Average
Availability for the immediately preceding month is equal to or greater than
$2,000,000, 1.75% above the Prime Rate or (ii) if Average Availability for the
immediately preceding month is less than $2,000,000, 2.00% above the Prime Rate
or (B) if such Revolving Advance is a LIBOR Loan, at a fixed rate per annum
equal to, as applicable, (i) if Average Availability for the immediately
preceding month is equal to or greater than $2,000,000, 3.50% above the
LIBOR-Based Rate for the Interest Period applicable to such Revolving Advance or
(ii) if Average Availability for the immediately preceding month is less than
$2,000,000, 3.75% above the LIBOR-Based Rate for the Interest Period applicable
to such Revolving Advance.”

 

4.     Reduction of Capital Expenditures Covenant. Section 7.12 of the Loan
Agreement is hereby amended and restated to read in full as follows (deleted
text is indicated by strikethrough formatting; added text is indicated in bold,
italicized and underscored type):     

     “7.12     Capital Expenditure Limitations. Borrowers shall not make any
Capital Expenditure if, after giving effect to such Capital Expenditure, the
aggregate cost of all Capital Expenditures made by Borrowers, collectively, in
any Fiscal Year would exceed $3,000,000 $1,500,000. For any Fiscal Year, in
addition to making Capital Expenditures in an aggregate amount of up to
$3,000,000 $1,500,000 for such Fiscal Year, Borrowers may carry over to, and use
in, such Fiscal Year any unused permitted Capital Expenditures allocation from
the immediately preceding Fiscal Year.

 

5.     Addition of Definition of Average Excess Availability. Exhibit A to the
Loan Agreement is hereby amended and supplemented by adding therein a definition
of “Average Excess Availability” as follows:

 

“Average Availability” means, for any month of determination thereof, average
daily Availability for such month.

 

6.     Amendment to Compliance Certificate. Exhibit E to the Loan Agreement is
hereby amended and restated in its entirety to read in full as set forth on
Exhibit E to this Amendment (deleted text is indicated by strikethrough
formatting; added text is indicated in bold, italicized and underscored type).

 

 

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7.     Restriction on Cash Payments of Subordinated Debt. Notwithstanding
anything to the contrary set forth in: (a) the Subordination Agreement dated as
of August 10, 2017 between Lender and Cross River Partners, L.P. (“Subordinate
Creditor”); (b) the definition of “Payment Conditions” set forth in the Loan
Agreement; or (c) any other provision of the Loan Agreement or any other Loan
Document, Borrower shall not make, and by its acknowledgment signature below
Subordinate Creditor agrees not to accept, demand or receive, any cash payments
of interest or principal on the Subordinated Debt owed by Borrower to
Subordinate Creditor unless and until Borrower obtains an additional term loan
in an original principal amount of at least $7,000,000 (the “Additional Term
Loan”) and uses all of the net proceeds of the Additional Term Loan to make a
pay down of the principal balance of the Revolving Advances and a concurrent
permanent reduction of the Revolving Line. For the avoidance of doubt, nothing
in this Section 7 shall prevent Borrower from making or Subordinate Creditor
from accepting and retaining payments of interest in kind on Borrower’s
Subordinated Debt to Subordinate Creditor prior to Borrower’s obtaining the
Additional Term Loan.     

 

8.     Amendment and Waiver Fee. In consideration of Lender’s agreement to enter
into this Amendment and to provide Borrowers the accommodations contemplated
hereunder, Borrowers shall pay to Lender, on the date hereof, a one-time fee in
the amount of $25,000 (the “Amendment Fee”). Each Borrower acknowledges and
agrees that the Amendment Fee shall be fully earned and non-refundable when due
and that Lender may effect payment of the Amendment Fee by charging the full
amount thereof to any deposit account maintained by any Borrower with Lender.

 

9.     Conditions Precedent. The effectiveness of this Amendment shall be
subject to the prior satisfaction of each of the following conditions:

 

(a)     Lender shall have received this Amendment, duly executed by each
Borrower and, for the purpose of Section 7 only, Subordinate Creditor;

 

(b)     Lender shall have received the Amendment Fee; and

 

(c)     Lender shall have received such other documents and completion of such
other matters as Lender may reasonably deem necessary or appropriate.

 

10.     Miscellaneous.

 

(a)     Survival of Representations and Warranties. All representations and
warranties made in the Loan Agreement or in any other Loan Document shall
survive the execution and delivery of this Amendment.

 

(b)     References to the Loan Agreement. The Loan Agreement, each of the other
Loan Documents, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof, or pursuant to
the terms of the Loan Agreement as amended hereby, are hereby amended so that
any reference therein to the Loan Agreement shall mean a reference to the Loan
Agreement as amended by this Amendment.

 

(c)     Loan Agreement Remains in Effect. The Loan Agreement and the other Loan
Documents remain in full force and effect, and each Borrower hereby ratifies and
confirms its agreements and covenants contained therein. Each Borrower hereby
confirms that, after giving effect to this Amendment, no default or Event of
Default shall have occurred and be continuing.

 

(d)     Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

 

(e)     Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of California applied to contracts to be
performed wholly within the State of California.

 

(f)     Counterparts. This Amendment may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument. If any signature to this Amendment is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing this
Amendment (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature page were an original
hereof.

 

(g)     Headings. The headings, captions and arrangements used in this Amendment
are for convenience only and shall not affect the interpretation of this
Amendment.

 

(h)     Expenses of Lender. Borrowers jointly and severally agree to pay on
demand all costs and expenses reasonably incurred by Lender in connection with
the preparation, negotiation and execution of this Amendment, including, without
limitation, the reasonable fees and expenses of Lender’s legal counsel.

 

(i)     NO ORAL AGREEMENTS. THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT AMONG
THE PARTIES HERETO WITH REGARD TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

 

 

[Remainder of page intentionally left blank. Signature page(s) follow(s).]

 

 

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IN WITNESS WHEREOF, the parties hereto have entered into this Amendment by their
respective duly authorized officers as of the date first above written.

 

BORROWERS:

 

ENSERVCO CORPORATION,
a Delaware corporation

 

By:     /s/ Ian Dickinson          
Name:      Ian Dickinson
Title:      President and Chief Executive Officer

 

DILLCO FLUID SERVICE, INC.,
a Kansas corporation

 

By:     /s/ Ian Dickinson               
Name:      Ian Dickinson
Title:      President and Chief Executive Officer

 

HEAT WAVES HOT OIL SERVICES LLC,
a Colorado limited liability company

 

By:     /s/ Ian Dickinson          
Name:      Ian Dickinson
Title:      Manager and President

 

HEAT WAVES WATER MANAGEMENT, LLC,
a Colorado limited liability company

 

By:     /s/ Ian Dickinson               
Name:      Ian Dickinson
Title:      Manager and President

 

ADLER HOT OIL SERVICE, LLC,

a Delaware limited liability company

By      /s/ Ian Dickinson          
Name:     Ian Dickinson
Title:     Manager and President

 

 

 

 

FOR THE PURPOSE OF SECTION 7 ONLY:

 

CROSS RIVER PARTNERS, L.P.,
a Delaware limited partnership

By:     Cross River Management, LLC
Its:     General Partner

 

     By: ______/s/ Richard Murphy_____________
          Richard A. Murphy
          Managing Member

 

 

LENDER:

 

EAST WEST BANK,

a California banking corporation

 

 

By:     /s/ Nima Michael Rassouli          
Name:     Nima Michael Rassouli
Title:     Vice President

 

 

 

 

 

 

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EXHIBIT E

 

FORM OF COMPLIANCE CERTIFICATE

 

Compliance Certificate

 

To:

East West Bank

Date:

August 12, 2019

Subject:

Enservco Corporation, Dillco Fluid Service, Inc., Heat Waves Hot Oil Services
LLC, Heat Waves Water Management LLC and Adler Hot Oil Service, LLC

 

Financial Statements

 

In accordance with our Loan and Security Agreement dated as of August 12, 2017,
as amended, modified, extended, renewed, supplemented or restated (the “Loan
Agreement”), attached are the financial statements of Enservco Corporation and
its Subsidiaries on a consolidated basis as of and for the month ended
____________ ____, 20__ (the “Reporting Date”) and the year-to-date period then
ended (the “Current Financials”) required to be delivered pursuant to
Section 6.2 of the Loan Agreement. All terms used in this certificate have the
respective meanings given to such terms in the Loan Agreement.

 

Administrative Borrower certifies that the Current Financials have been prepared
in accordance with GAAP and fairly present in all material respects the
consolidated financial condition of the Loan Parties as of the date thereof,
subject in the case of unaudited statements to changes resulting from audit and
normal year-end adjustment.

 

Defaults. (Check one):

 

Administrative Borrower further certifies that:

 

☐

Except as previously reported in writing to Lender, there exists no event or
circumstance which is or which with the passage of time, the giving of notice,
or both would constitute an Event of Default or, if such an event of
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that the Loan Parties have taken or
propose to take with respect thereto..

 

☐

There exists no event or circumstance which is or which with the passage of
time, the giving of notice, or both would constitute an Event of Default or, if
such an event of circumstance exists, a writing attached hereto specifies the
nature thereof, the period of existence thereof and the action that the Loan
Parties have taken or propose to take with respect thereto.

 

Representations and Warranties:

 

Administrative Borrower further certifies that each of the representations and
warranties made by Borrowers, any other Loan Party and/or any Owner of any
Borrower in the Loan Agreement and/or in any other Loan Document are true,
correct and complete in all material respects on and as of the date of this
Compliance Certificate as if made on and as of the date of this Compliance
Certificate (and for purposes of this Compliance Certificate, the
representations and warranties in Section 5.16 of the Loan Agreement shall be
deemed to refer to the financial statements of Enservco Corporation and its
Subsidiaries on a consolidated basis delivered to the Lender with this
Compliance Certificate); provided, that any representations or warranties
qualified by reference to materiality, Material Adverse Effect or any similar
language are true, correct and complete in all respects.

 

Financial Covenants. Administrative Borrower further certifies as follows:

 

1.     Minimum Liquidity. Pursuant to Section 6.7(a) of the Loan Agreement, as
of the Reporting Date, if a Liquidity Testing Trigger Period was then in effect,
Liquidity was $______________ which ☐ satisfies ☐ does not satisfy the
requirement that such amount be not less than $1,500,000 at all times during a
Liquidity Testing Trigger Period.

 

2.     Minimum Fixed Charge Coverage Ratio. Pursuant to Section 6.7(b) of the
Loan Agreement, as of the Reporting Date, the Fixed Charge Coverage Ratio was
_____ to 1.00 which ☐ satisfies ☐ does not satisfy the requirement that such
ratio be no less than 1.10 to 1.00 on the Reporting Date.1

 

3.     Capital Expenditures. Pursuant to Section 7.12 of the Loan Agreement, for
the year-to-date period ending on the Reporting Date, the Loan Parties have
expended or contracted to expend during the Fiscal Year ended _______________,
20___, for Capital Expenditures, $_________________ in the aggregate, which ☐
satisfies ☐ does not satisfy the requirement that such expenditures not exceed
$3,000,000 $1,500,000 in the aggregate during such Fiscal Year, plus, in the
case of Fiscal Year 2018 or any subsequent Fiscal Year, the amount of any unused
permitted Capital Expenditures for the immediately preceding Fiscal Year.

 

Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP, subject to normal year-end adjustments and
absence of footnotes.

 

Additional Intellectual Property. Administrative Borrower further certifies that
since the date of the last Compliance Certificate delivered by Administrative
Borrower to Lender, Borrowers have filed applications for or have registered the
following additional Copyrights, Patents and/or Trademarks:     

     ☐     None     

     ☐     As indicated below:                    

 

Copyrights

 

Description          Registration/Application
No.          Registration/Application Date

 

 

 

Patents

 

Description          Registration/Application
No.          Registration/Application Date

 

 

 

 Trademarks

 

Description          Registration/Application
No.          Registration/Application Date

 

 

 

ENSERVCO CORPORATION,
a Delaware corporation,
as Administrative Borrower

 

By:                              
Name:                              
Title:                              

 

 

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1 ending October 31, 2017 and November 30, 2017.