Exhibit 10.2

 

SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT AND
CONSENT

 

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONSENT (this
“Amendment and Consent”), is entered into as of October 26, 2018 (the “Effective
Date”), by and among ENSERVCO CORPORATION, a Delaware corporation (“Parent”),
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 (the foregoing, collectively with Parent,
“Borrowers”), and EAST WEST BANK, a California banking corporation (“Lender”),
with reference to the following facts:

 

RECITALS

 

A.     Borrowers and Lender are parties to that certain Loan and Security
Agreement dated as of August 10, 2017 (as amended, restated, supplemented or
otherwise modified from time to time, the “Loan Agreement”).

 

B.     Borrowers have notified Lender of Parent’s intent to acquire all of the
outstanding membership interests of Adler Hot Oil Service, LLC, a Delaware
limited liability company (the “Target”), from Adler Hot Oil Holdings, LLC, a
Delaware limited liability company (the “Seller”), pursuant to the terms of that
certain Membership Interest Purchase Agreement dated as of the Effective Date by
and among the Seller, the Target, Parent and certain other parties thereto (the
“Acquisition Agreement”), for certain consideration as follows: (i) cash
consideration in an amount equal to $2,761,858.99 paid to the Seller, (ii) cash
consideration in an amount equal to $2,439,311.14 paid to CapX Fund IV, L.P.
(“CapEx Lender”) on behalf of the Target to pay off all indebtedness of the
Target owing to CapEx Lender on the Effective Date, (iii) the issuance of
$4,800,000 in secured principal indebtedness, (iv) up to $1,000,000 as an
“Indemnity Holdback Payment”, and (v) an earn-out obligation of up to $1,000,000
(the “Acquisition”).

 

C.     Borrowers have requested (i) that Lender consent to the Acquisition and
(ii) amend certain provisions of the Loan Agreement, each of which Lender has
agreed to do, subject in all respects to the terms and conditions set forth
herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

 

1.     Definitions. Capitalized terms used but not defined in this Amendment and
Consent shall have the respective meanings given to them in the Loan Agreement.

 

2.     Consent to Adler Acquisition. Notwithstanding anything to the contrary
set forth in the Loan Agreement or in any other Loan Document, Lender hereby
consents to Parent’s consummation of the Acquisition, subject to the
satisfaction of each of the following conditions precedent:

 

(a)     Lender shall have had a reasonable opportunity (which shall not be less
than 48 hours prior to the effective date of the Acquisition (the “Acquisition
Date”), unless Lender otherwise agrees to a shorter time period) to review the
definitive Acquisition Agreement, the other material documents relating to the
Acquisition (collectively with the Acquisition Agreement, the “Acquisition
Documentation”), and such other agreements, documents, instruments and written
materials as Lender may reasonably request;

 

(b)     Lender shall have received a payoff letter, in form and substance
satisfactory to Lender, from CapEx Lender;

 

(c)     the aggregate cash consideration paid by Parent or any of its Affiliates
in connection with the Acquisition shall not exceed $2,761,858.99;

 

(d)     except to the extent expressly set forth herein, no Loan Party shall
incur any Indebtedness in connection with the Acquisition except for Permitted
Indebtedness;

 

(e)     except to the extent expressly set forth herein, no Loan Party shall
incur any Liens in connection with the Acquisition except for Permitted Liens;

 

(f)     immediately before and after giving effect to the Acquisition, no
default or Event of Default shall exist; and

 

(g)     the final terms of the Acquisition shall otherwise be satisfactory to
Lender as determined in its reasonable discretion.

 

3.     Amendments to Loan Agreement.

 

(a)     Section 7.12 of the Loan Agreement (Capital Expenditure Limitations) is
hereby amended and restated in its entirety to read 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 $3,000,000. For any Fiscal Year, in addition to making Capital
Expenditures in an aggregate amount of up to $3,000,000 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.

 

(b)     Exhibit A (Definitions) to the Loan Agreement is hereby amended by
adding the following new definitions in alphabetical order as follows:

 

“Adler Acquisition Agreement” means that certain Membership Interest Purchase
Agreement dated as of October 26, 2018, among Enservco, Adler Hot Oil Holdings,
LLC, a Delaware limited liability company, Adler Hot Oil Service, LLC, a
Delaware limited liability company, and certain other parties thereto.

 

“Second Amendment Effective Date” means October 26, 2018.

 

“Seller” means Adler Hot Oil Holdings, LLC, a Delaware limited liability
company.

 

“Subordinated Guaranty” means that certain Guaranty, dated as of the Second
Amendment Effective Date, made by certain Borrowers in favor of Seller.

 

“Subordinated Seller Note” means that certain Subordinated Promissory Note,
dated as of the Second Amendment Effective Date, made by Enservco to Seller, in
the original principal amount of $4,800,000.

 

(c)     Exhibit A (Definitions) to the Loan Agreement is hereby amended by
amending and restating the definitions of “Letter of Credit Sublimit”, “Maximum
Revolving Advances Limit” and “Permitted Indebtedness” as follows:

 

“Letter of Credit Sublimit” means a sublimit for Letters of Credit under the
Revolving Line not to exceed $3,700,000.

 

“Maximum Revolving Advances Limit” means $37,000,000.

 

“Permitted Indebtedness” means:

 

 

(a)

Indebtedness of the Loan Parties in favor of Lender arising under this Agreement
or any other Loan Document;

 

 

(b)

Hedging Obligations of the Loan Parties in favor of Lender or any Affiliate of
Lender;

 

 

(c)

Indebtedness existing on the Closing Date and disclosed in the Disclosure
Schedules;

 

 

(d)

Indebtedness not to exceed $100,000 in the aggregate in any fiscal year of the
Loan Parties secured by a Lien described in clause (d) of the defined term
“Permitted Liens,” provided such Indebtedness does not exceed the lesser of the
cost or fair market value of the equipment financed with such Indebtedness;

 

 

(e)

unsecured Subordinated Debt in an aggregate principal amount outstanding at any
time not to exceed $6,500,000;

 

 

(f)

between and including the Second Amendment Effective Date and April 26, 2020,
unsecured Subordinated Debt of up to $1,000,000, which Subordinated Debt
constitutes the “Indemnity Holdback Payment” (as defined in the Adler
Acquisition Agreement);

 

 

(g)

between and including the Second Amendment Date and the earlier of (i) 20
“Business Days” (as defined in the Adler Acquisition Agreement) after the end of
the “Earn-out Period” (as defined in the Adler Acquisition Agreement) and (ii)
the date on which the “Earn-out Payment” (as defined in the Adler Acquisition
Agreement) is made, unsecured Subordinated Debt of up to $1,000,000, which
Subordinated Debt constitutes the “Earn-out Payment” (as defined in the Adler
Acquisition Agreement);

 

 

(h)

between and including the Second Amendment Effective Date and March 31, 2019,
secured Subordinated Debt constituting principal indebtedness and interest and
fees thereon, owing to Seller pursuant to the Subordinated Seller Note;

 

 

(i)

between and including the Second Amendment Effective Date and March 31, 2019,
guaranty obligations owing to Seller pursuant to the Subordinated Guaranty;

 

 

(j)

Indebtedness to trade creditors incurred in the ordinary course of business; and

 

 

(k)

extensions, refinancings and renewals of any items of Permitted Indebtedness,
provided that the principal amount is not increased or the terms modified to
impose more burdensome terms upon the applicable Loan Party.

 

(d)     Existing Exhibit E (Form of Compliance Certificate) to the Loan
Agreement is hereby replaced in its entirety with Exhibit E attached hereto.

 

4.     Limitations of Consent and Amendment(s).

 

(a)     This Amendment and Consent is effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to (a)
constitute a consent to or an amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy that Lender may now have or may have in the future under or in connection
with any Loan Document.

 

(b)     This Amendment and Consent shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except as
herein amended, are hereby ratified and confirmed and shall remain in full force
and effect.

 

5.     Representations and Warranties. Each Borrower hereby represents and
warrants to Lender that, immediately after giving effect to this Amendment and
Consent, (a) the representations and warranties contained in the Loan Documents
are true, accurate and complete in all material respects as of the Effective
Date (except to the extent (i) any such representation or warranty is, by its
express terms, already qualified by materiality, in which case such
representation or warranty shall be true and correct in all respect, or (ii) any
such representation or warranty, by its express terms, relates to an earlier
date, in which case such representation or warranty shall be true and correct as
of such date), and (b) no default or Event of Default has occurred and is
continuing.

 

6.     Integration. This Amendment and Consent and the other Loan Documents
represent the entire agreement about this subject matter and supersede all prior
negotiations and agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Amendment and Consent and the other Loan Documents merge
into this Amendment and Consent and the other Loan Documents.

 

7.     Counterparts. This Amendment and Consent may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

 

8.     Effectiveness. This Amendment and Consent shall be deemed effective upon
satisfaction of each of the following conditions precedent:

 

(a)     Lender shall have received this Amendment and Consent, duly executed by
Borrowers;

 

(b)     Borrowers shall have delivered to Lender a certificate certifying as to
among other things, (i) that the copies of the (A) Acquisition Documentation and
(B) agreements and/or instruments evidencing the Subordinated Debt issued, or to
be issued, to Seller as partial consideration for the Acquisition (the
“Acquisition Debt”), are, in each case, true and correct in all respects;

 

(c)     Borrowers shall have delivered to Lender a subordination agreement, in
form and substance satisfactory to Lender, in respect of the Acquisition Debt,
duly executed by Seller and acknowledged by Borrowers;

 

(d)     Borrowers shall have delivered to Lender an affirmation of subordination
agreement, in form and substance satisfactory to Lender, duly executed by Cross
River Partners, L.P.;

 

(e)     Borrowers shall have delivered to Lender a pro forma corporate
organization chart reflecting the corporate structure of Borrowers after giving
effect to the Acquisition;

 

(f)     Lender shall have received all unpaid fees, expenses and other charges,
due and owing by any Loan Party to Lender or Lender’s counsel under the Loan
Documents and in connection with this Amendment and Consent, in each case to the
extent invoiced prior to the Effective Date;

 

(g)     Lender shall have completed its (a) business, legal and collateral
diligence, (b) background searches, Patriot Act and OFAC/PEP compliance
protocols, (c) and credit approval procedures, in each case in respect of the
Target;

 

(h)     Borrowers and the Target shall have delivered to Lender agreements, each
in form and substance satisfactory to Lender, effective to join the Target as a
party to the Loan Agreement, and to execute and/or join such other Loan
Documents as Lender may require (collectively, the “Joinder Documents”), as a
“Borrower” or “Grantor” (or other term of like import) thereunder, in each case
with all attendant schedules and attachments as though the Target were
originally a party to the Loan Agreement and such other Loan Documents;

 

(i)     The Target shall have delivered to Lender, (i) a certificate from a duly
authorized officer of the Target, certifying, among other things, that the
resolutions, governing documents, formation documents, and incumbency
certificate, in each case attached thereto, are true, accurate and complete in
all respects as of the Effective Date, and (ii) resolutions of the members,
manager, board of managers or other managing body of the Target, authorizing,
among other things, the Target’s entry into and performance under each Loan
Document to which the Target shall become a party;

 

(j)     The Target shall have delivered to Lender a collateral information
certificate in respect of the Target;

 

(k)     The Target shall have delivered to Lender the formation and governing
documents of, and good standing certificates for, the Target, in each case
certified by the Secretary of State of the state of formation of the Target and
of each other state in which the Target’s failure to be qualified to operate in
such state could reasonably be expected to have a Material Adverse Effect, each
as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(l)     The Target shall have delivered to Lender certificates of insurance,
together with endorsements thereto, for the Target as required by Section 6.5 of
the Loan Agreement, in each case in form and substance reasonably satisfactory
to Lender;

 

(m)     Enservco shall have delivered to Lender certified copies, dated not
earlier than thirty (30) days prior to the Effective Date, of such financing
statement searches with respect to the Target as Lender may reasonably request,
in each case satisfactory to Lender in its reasonable discretion, accompanied by
written evidence (including any UCC termination statements) that the Liens
indicated in any such financing statements either constitute Permitted Liens or
have been or will be terminated or released prior to the Effective Date;

 

(n)     Enservco shall have delivered to Lender deposit account control
agreements, in each case in form and substance satisfactory to Lender, in
respect of any deposit accounts and securities/investment accounts maintained by
the Target with any third-party depository institution or securities
intermediary;

 

(o)     The Target shall have used commercially reasonable efforts to deliver a
landlord waiver or bailee waiver, as applicable, in each case in form and
substance satisfactory to Lender, in respect of any leased or warehouse location
where Target maintains any Collateral; provided, however, that in lieu of
providing such landlord waivers or bailee waivers, Borrowers may establish a
Reserve against Availability in the amount of three (3) months’ rent for any
leased or warehouse location where Target maintains any Collateral;

 

(p)     Lender shall have received such other documents, agreements and
instruments as Lender may request in its reasonable discretion;

 

(q)     Both before and after giving effect to the Acquisition and the
transactions contemplated by the Joinder Documents, Borrowers shall have Excess
Availability of not less than $3,000,000; and

 

(r)     Borrowers shall have paid to Lender a commitment fee in respect of the
incremental increase in the Revolving Line in an amount equal to $35,000, which
fee shall be nonrefundable and fully earned as of the Effective Date.

 

9.     Acknowledgement Regarding Borrowing Base. Borrowers acknowledge and agree
that no assets of the Target shall be eligible for inclusion in the Borrowing
Base prior to the completion of, as applicable, a collateral audit, an inventory
count, or, if requested by Lender in its reasonable discretion, an Equipment
appraisal (which such audit, inventory count or Equipment appraisal shall not be
included in calculating the limitations on physical inventories, collateral
reports, and appraisals set forth in Sections 6.11 and 6.12 of the Loan
Agreement) with respect to such assets, and other due diligence as Lender may
reasonably deem appropriate or necessary. Prior to the closing of the
Acquisition, Lender shall provide written confirmation to Borrowers of its
satisfactory completion of such collateral audit, inventory count, or Equipment
appraisal, or due diligence with respect to such assets.

 

10.     CHOICE OF LAW, VENUE, JUDICIAL REFERENCE AND JURY TRIAL WAIVER. THIS
AMENDMENT AND CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL
BE SUBJECT TO THE PROVISIONS REGARDING CHOICE OF LAW, VENUE, JUDICIAL REFERENCE
AND JURY TRIAL WAIVER SET FORTH IN SECTION 11 OF THE LOAN AGREEMENT, AND SUCH
PROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS.

 

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Consent to
be duly executed and delivered as of the date first written above.

 

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 SERVICE 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               

 

 

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LENDER:

 

EAST WEST BANK,
a California banking corporation

 

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