Exhibit 10.1

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER

 

THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this
“Amendment”), dated as of September 23, 2020, is entered into by and among
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”), solely for the purpose of Section 13 hereof, CROSS
RIVER PARTNERS, L.P., a Delaware limited partnership (“Cross River”), and EAST
WEST BANK, a California banking corporation (“Lender”), with reference to the
following facts:

 

RECITALS

 

A.     Borrowers and Lender previously entered into that certain Loan and
Security Agreement, dated as of August 10, 2017, as amended by the First
Amendment to Loan and Security Agreement dated as of November 20, 2017, the
Second Amendment to Loan and Security Agreement dated as of October 26, 2018,
the Third Amendment to Loan and Security Agreement and Waiver dated as of August
14, 2019, the Fourth Amendment to Loan and Security Agreement dated as of July
6, 2020, the letter from Lender to Administrative Borrower dated August 10,
2020, and the letter from Lender to Administrative Borrower dated September 14,
2020 (collectively, the “Loan Agreement”).

 

B.     Pursuant to the Loan Agreement, Lender provides Borrowers a Revolving
Line with a Maximum Revolving Advances Limit of $37,000,000, which includes a
$3,700,000 Letter of Credit Sublimit.

 

C.     As of September 10, 2020, the aggregate outstanding Revolving Advances
(including any and all outstanding Letter of Credit reimbursement obligations)
totaled $33,118,139.57.

 

D.     Borrowers and Lender wish to enter into this Amendment, by which:

 

(i)     Lender shall agree, among other things, as consideration for this
Amendment: (a) to forgive $16,000,000 of the principal amount of the outstanding
Revolving Advances in exchange for equity in Enservco as described in D.(ii)
below; (b) to continue to provide Revolving Advances to Borrower, subject to a
Maximum Revolving Advances Limit of $1,000,000, and to eliminate the Letter of
Credit sub-facility; (c) to convert the excess of the aggregate outstanding
Revolving Advances as of the date of this Amendment in excess of $16,000,000 to
an equipment term loan (the “Equipment Loan”); (d) to extend the maturity date
of the Revolving Advances and the Equipment Loan to October 15, 2021; and (e) to
waive any Events of Default that have occurred and are continuing under Section
8.2(a) of the Loan Agreement due to Borrowers’ breach at any time prior to
September 30, 2020 of the Liquidity and Fixed Charge Coverage Ratio covenants
set forth in Section 6.7 of the Loan Agreement (the “Existing Events of
Default”);      

 

(ii)     Borrowers shall agree, among other things: (a) to grant Lender
8,000,000 shares of unregistered Enservco common stock (the “Initial Shares”)
and to register such shares within six months after the effective date of this
Amendment; and (b) to grant Lender warrants to purchase an additional 15,000,000
shares of common stock of Enservco exercisable from one year after the date of
issuance until five years after the date of issuance at a strike price of $0.25
per common share, subject to adjustment for any subsequent reverse split, under
a customary, standard warrant agreement, subject to New York Stock Exchange
continued listing requirements (the “Warrant Shares”);           

 

1

--------------------------------------------------------------------------------

 

 

(iii)     Cross River shall agree not to dispose of any of its holdings of
shares of common stock of Enservco until the earliest of (a) October 15, 2021,
(b) the date on which Lender exercises its option to purchase any Warrant
Shares, and (c) the date on which all Obligations have been repaid and Lender
has no further commitment under the Loan Agreement to make additional Revolving
Advances or to issue additional Letters of Credit, or (d) such other date to
which Lender and Cross River may mutually agree (such applicable date, the “Sale
Block Deadline”); and the parties shall make certain other amendments to the
Loan Agreement, all 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.     Forgiveness of Certain Obligations. Lender hereby forgives Borrower’s
obligation to repay $16,000,000 of the principal amount of the outstanding
Revolving Advances.

 

3.     Conversion of Certain Obligations to Equipment Loan. Lender hereby
converts the amount of the outstanding Revolving Advances in excess of
$16,000,000 as of the date of this Amendment into the Equipment Loan.

 

4.     Amendments to Revolving Line.      

 

A.     Amendment of Borrowing Base to Remove Equipment. Exhibit A to the Loan
Agreement is hereby amended by amending and restating the definition of
“Borrowing Base” so that it reads in full as follows:     

 

“Borrowing Base” means, at any time, 85% of Borrowers’ Eligible Accounts.     

 

B.     Reduction of Revolving Line. Exhibit A to the Loan Agreement is hereby
amended by amending and restating the definition of “Maximum Revolving Advance
Amount” so that it reads in full as follows:     

 

“Maximum Revolving Advances Limit” means $1,000,000.     

 

C.     Elimination of Letter of Credit Sub-Facility. The Letter of Credit
Sub-Facility is hereby terminated. Any issued and outstanding irrevocable
Letters of Credit may remain outstanding through its expiry date, but Lender
shall not issue any additional Letters of Credit for the account of any
Borrower.

 

5.     Maturity of Obligations. Notwithstanding anything to the contrary set
forth in the definition of “Revolving Loan Maturity Date” or any other provision
of the Loan Agreement or any other Loan Document, the entire principal amount of
Revolving Advances, the entire principal amount of the Equipment Loan, all
interest accrued on the Revolving Advances and the Equipment Loan, all accrued
and unpaid fees, all outstanding Lender Expenses, and all other Obligations
shall be due and payable in full on October 15, 2021 (the “Maturity Date”).

 

6.     Interest; Discontinuance of LIBOR Loans. Notwithstanding anything to the
contrary set forth in Section 2.2(a) of the Loan Agreement, Borrowers shall pay
interest on the principal balance of the Revolving Advances and the Equipment
Loan in the following combined amount: (a) cash interest at a rate per annum
equal to the Prime Rate plus two (2) percentage points; and (b) non-cash,
payment-in-kind interest (“PIK Interest”) at the rate of three percent (3%) per
annum. Borrower shall pay all cash interest monthly, beginning on October 15,
2020 and continuing on the fifteenth (15th) day of each month thereafter during
the term of the Loan Agreement. All PIK Interest shall accrue until, and shall
be payable in full on, the Maturity Date. For the avoidance of doubt, Borrowers
may not request that any Revolving Advances or any portion of the Equipment Loan
bear interest on the basis of LIBOR.

 

2

--------------------------------------------------------------------------------

 

 

7.     Optional Loan Prepayments. Borrowers may prepay the principal amount of
the Revolving Advances and the Equipment Loan at any time, in whole or in part,
without premium or penalty.

 

8.     Conditional Mandatory Principal Payments. In addition to their obligation
to pay all outstanding principal on the Revolving Advances and the Equipment
Loan on the Maturity Date, if as of the last day of any month, commencing with
the month ending October 31, 2020, the aggregate balance of Borrowers’ cash on
deposit in deposit accounts at Lender is greater than the aggregate gross
receipts of equity sold by Enservco after September 18, 2020, then, no later
than the fifteenth (15th) day of the immediately following month, Borrowers’
excess cash shall be applied first to reduce the principal amount of outstanding
Revolving Advances, if needed, and then, if any surplus funds remain, to reduce
the principal balance of the Equipment Loan.

 

9.     Deferral of Minimum Liquidity Covenant; Elimination of Fixed Charge
Coverage Ratio Covenant. Section 6.7 of the Loan Agreement is hereby amended and
restated to read in full as follows:     

 

 “6.7     Liquidity Covenant. At all times on or after December 31, 2020,
Borrower shall maintain Liquidity of not less than $1,500,000. For the purpose
of this covenant, ‘Liquidity’ shall mean Borrowers’ total cash on deposit in one
or more deposit accounts at East West Bank.”

 

10.     Reduction of Capital Expenditures Limit. Section 7.12 of the Loan
Agreement is hereby amended and restated to read in full as follows:     

 

“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 $1,200,000. For any Fiscal Year, in addition to making Capital
Expenditures in an aggregate amount of up to $1,200,000 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.

 

11.     Initial Shares and Warrants. In consideration of the accommodations
granted by Lender to Borrowers hereunder, on the effective date of this
Amendment, Enservco shall:     

 

(a)     Grant the Initial Shares to Lender pursuant to a subscription agreement
in form and substance mutually and reasonably satisfactory to Enservco and
Lender (the “Equity Agreement”); and     

 

(b)     Enter into a warrant agreement for the Warrant Shares in form and
substance mutually and reasonably satisfactory to Enservco and Lender (the
“Warrant Agreement”)..

 

12.     Registration of Initial Shares. Within 6 months after the effective date
of this Amendment, Enservco shall file a registration statement with the U.S.
Securities and Exchange Commission (the “SEC”) and use its commercially
reasonable best efforts to allow Lender to sell the Initial Shares publicly as
Lender may determine from time to time in compliance with applicable rules and
regulations of the SEC. Enservco agrees to reasonably assist Lender in reselling
some or all of the Initial Shares, including by holding at least one road show
presentation.

 

3

--------------------------------------------------------------------------------

 

 

13.     Covenants Not to Dispose of Enservco Shares. Lender hereby agrees to not
dispose of any of the Initial Shares until the date six months after the date of
this Amendment. By its signature below, Cross River hereby agrees not to dispose
of any of its current holdings of shares of common stock of Enservco until the
Sale Block Deadline. Cross River and Borrowers acknowledge and agree that a
breach of this Section 13 by Cross River shall constitute an Event of Default.

 

14.     Additional Equity Offerings. Enservco shall seek to raise additional
equity from third parties under its existing registration statement on Form S-3
(which contains a maximum of $8,000,000 of registered securities) and other
registration statements as may be filed in the future in an aggregate amount at
least equal to projected working capital needs of Borrowers through the amended
term of the Loan Agreement. Enservco also shall continue to seek any other
public and private financing that may involve financing in addition to proceeds
under its existing S-3 registration statement. Lender will not object to
Enservco’s arrangements with third party capital providers, provided that such
arrangements do not materially impact Lender’s security interests in Collateral
for the Obligations.

 

15.     Waiver of Existing Events of Default. Lender hereby waives each of the
Existing Events of Default. Such waiver shall constitute a waiver of only the
Existing Events of Default and shall not excuse Borrowers’ compliance with the
financial covenants set forth in Section 6.7 of the Loan Agreement, as amended
hereby, for any covenant test date after September 30, 2020.

 

16.     Amendment of Borrowing Base Certificate Exhibit. Exhibit D to the Loan
Agreement is hereby amended and restated to read in full as set forth on Exhibit
D to this Amendment.

 

17.     Amendment of Compliance Certificate Exhibit. Exhibit E to the Loan
Agreement is hereby amended and restated to read in full as set forth on Exhibit
E to this Amendment.

 

18.     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 10 only, Cross River;

 

(b)     Lender shall have received the Equity Agreement, duly executed by
Enservco;

 

(c)     Lender shall have received the Warrant Agreement, duly executed by
Enservco; and

 

(d)     Lender shall have received such other documents as Lender may reasonably
deem necessary or appropriate to effectuate the purposes of this Amendment.

 

19.     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.

 

4

--------------------------------------------------------------------------------

 

 

(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.

 

(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).]

 

5

--------------------------------------------------------------------------------

 

 

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/ Marjorie Hargrave

 

 

Name:

 Marjorie Hargrave

 

 

Title:

 Chief Financial Officer

 

 

 

 

DILLCO FLUID SERVICE, INC.

 

  a Kansas corporation  

 

 

 

 

 

 

 

 

 

By:

/s/ Marjorie Hargrave

 

 

Name:

 Marjorie Hargrave

 

 

Title:

 Chief Financial Officer

 

 

 

 

HEAT WAVES HOT OIL SERVICES LLC,

 

  a Colorado limited liability company  

 

 

 

 

 

 

 

 

 

By:

/s/ Marjorie Hargrave

 

 

Name:

 Marjorie Hargrave

 

 

Title:

 Chief Financial Officer

 

 

 

 

HEAT WAVES WATER MANAGEMENT, LLC,

 

  a Colorado limited liability company  

 

 

 

 

 

 

 

 

 

By:

/s/ Marjorie Hargrave

 

 

Name:

 Marjorie Hargrave

 

 

Title:

 Chief Financial Officer

 

 

 

ADLER HOT OIL SERVICE, LLC,

 

  a Delaware limited liability company  

 

 

 

 

 

 

 

 

 

By:

/s/ Marjorie Hargrave

 

 

Name:

 Marjorie Hargrave

 

 

Title:

 Chief Financial Officer

 

 

 

Fifth Amendment to Loan and Security Agreement and Waiver

--------------------------------------------------------------------------------

 

 

 

FOR THE PURPOSE OF SECTION 13 ONLY:

 

 

 

 

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

 

 

 

 

  By: Cross River Management, LLC     Its: General Partner  

 

 

 

 

By:

/s/ Richard A. Murphy

 

 

 

 

Richard A. Murphy

 

 

 

 

Managing Member

 

       

Fifth Amendment to Loan and Security Agreement and Waiver

--------------------------------------------------------------------------------

 

 

 

LENDER:

 

        EAST WEST BANK,     a California banking corporation  

 

 

 

 

 

 

 

 

 

By:

/s/ Frank Chan

 

 

 

Frank Chan

 

 

 

Senior Vice President

 

 

Fifth Amendment to Loan and Security Agreement and Waiver

--------------------------------------------------------------------------------

 

 

EXHIBIT D

 

FORM OF BORROWING BASE CERTIFICATE

(To Be Provided By Lender’s ABL Group)

 

Exhibit D

--------------------------------------------------------------------------------

 

 

EXHIBIT E

 

FORM OF COMPLIANCE CERTIFICATE

 

Compliance Certificate

 

To:

East West Bank

   

Date:

                                             , 20___

   

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 10, 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.

 

Exhibit E
1

--------------------------------------------------------------------------------

 

 

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 Date1, Liquidity was $______________ which ☐ satisfies ☐ does
not satisfy the requirement that such amount be not less than $1,500,000 at all
times on or after December 31, 2020.

 

2.     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
$1,200,000 in the aggregate during such Fiscal Year, plus 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

 

 

--------------------------------------------------------------------------------

1 Applies only to Reporting Dates on or after December 31, 2020       
           

 

Exhibit E
2

--------------------------------------------------------------------------------

 

 

 Trademarks

 

 

Description Registration/Application No. Registration/Application Date

                    

 

ENSERVCO CORPORATION,

 

  a Delaware corporation,     as Administrative Borrower  

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Exhibit E
3