SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (herein called this "Amendment")
is executed on March 3, 2007 but is effective as of December 31, 2006, by and
among ENGLOBAL CORPORATION, a Nevada corporation ("ENGlobal Corporation"),
ENGLOBAL CORPORATE SERVICES, INC., a Texas corporation ("ENGlobal Corporate"),
ENGLOBAL ENGINEERING, INC., a Texas corporation ("ENGlobal Engineering"),
ENGLOBAL CONSTRUCTION RESOURCES, INC., a Texas corporation ("ENGlobal
Construction"), ENGLOBAL SYSTEMS, INC., a Texas corporation ("ENGlobal
Systems"), RPM ENGINEERING, INC., a Louisiana corporation ("RPM Engineering"),
ENGLOBAL TECHNICAL SERVICES, INC., a Texas corporation, formerly known as
ENGlobal Design Group, Inc. ("ENGlobal Technical"), ENGLOBAL AUTOMATION GROUP,
INC., a Texas corporation, formerly known as ENGlobal Technologies, Inc.
("ENGlobal Automation"), PEI INVESTMENTS, A TEXAS JOINT VENTURE, a Texas general
partnership ("PEI"), ENGLOBAL CANADA ULC, an Alberta corporation ("ENGlobal
Canada"), WRC CORPORATION, a Colorado corporation ("WRC"), and WRC CANADA LTD.,
an Alberta corporation ("WRC Canada"); individually and collectively, jointly
and severally, ENGlobal Corporation, ENGlobal Corporate, ENGlobal Engineering,
ENGlobal Construction, ENGlobal Systems, RPM Engineering, ENGlobal Technical,
ENGlobal Automation, PEI, ENGlobal Canada, WRC and WRC Canada are hereinafter
called "Borrower"), and COMERICA BANK ("Bank").
THE RECITALS
WHEREAS, Borrower and Bank have entered into that certain Credit Agreement
dated as of July 27, 2004 (as heretofore amended by a First Amendment to Credit
Agreement effective as of September 30, 2004, a Second Amendment to Credit
Agreement effective as of April 1, 2005, a Third Amendment to Credit Agreement
effective as of July 31, 2005, a Fourth Amendment to Credit Agreement dated as
of December 31, 2005, and a Fifth Amendment to Credit Agreement effective as of
July 26, 2006, and as it may hereafter be amended, the "Original Credit
Agreement"); and
WHEREAS, Borrower and Bank desire to amend the Original Credit Agreement as
provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Credit Agreement, in
consideration of the loans which may hereafter be made by Bank to Borrower, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I Definitions and References
------------------------------------
Section 1.1 Terms Defined in the Original Credit Agreement. Unless the
context otherwise requires or unless otherwise expressly defined herein, the
terms defined in the Original Credit Agreement shall have the same meanings
whenever used in this Amendment.
Section 1.2 Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this Section 1.2.
"Amendment" means this Sixth Amendment to Credit Agreement.
"Amendment Documents" means, collectively, this Amendment and any other
document required to be delivered by Borrower pursuant to Article III
hereof.
"Credit Agreement" means the Original Credit Agreement, as amended hereby.
"Original Omnibus Certificate" means the Omnibus Certificate dated July 27,
2004 executed and delivered by officers of each Borrower pursuant to the
Original Credit Agreement.
ARTICLE II Amendments to Original Credit Agreement
--------------------------------------------------
Section 2.1 The Original Credit Agreement is hereby amended by deleting
Section 4.4(b) and substituting therefor the following:
"(b) Minimum Net Worth. Maintain as of the last day of each calendar
quarter during the term of this Agreement a minimum Net Worth of not less
than the sum of (i) $40,116,000 plus (ii) 75% of Net Income earned in each
fiscal quarter beginning with the quarter ending March 31, 2007 (without
deduction for losses) plus (iii) 100% of the net proceeds of any offering,
sale or other transfer of any capital stock or equity securities of any
kind of the Borrower after the date hereof; provided for purposes of this
covenant adjustments may be made for any non-recurring transaction costs
incurred by Borrower."
Section 2.2 The Original Credit Agreement is hereby amended by deleting
Section 4.4(c) and substituting therefor the following:
"(c) Maximum Leverage Ratio. Maintain as of the last day of each calendar
month during the term of this Agreement a ratio of Funded Debt to Adjusted
EBITDA for the twelve (12) months ending on each date occurring during the
term of this Agreement no greater than 3.00 to 1; provided that, for
purposes of this covenant and subject to Bank approval, Adjusted EBITDA
shall have added back (A) the trailing 12-month EBITDA of new acquisitions
exceeding a gross purchase price of $2,500,000; provided further that for
any calculation hereunder that includes a calendar month prior to the date
of Borrower's purchase of AmTech Inspection, Cleveland Inspection or WRC
(each hereinafter called, an "Acquisition" and each month occurring before
an Acquisition, being a "Pre-Acquisition Month"), Adjusted EBITDA shall
include, for each Pre-Acquisition Month, a number equal to (i) the Adjusted
EBITDA of AmTech Inspection, Cleveland Inspection or WRC (as applicable)
for each calendar month after the applicable Acquisition divided by (ii)
the number of calendar months since the applicable Acquisition and (B)
expenses associated with Borrower's issuance and/or granting of stock
options to Borrower's directors and employees; provided further that for
any calculation hereunder, Adjusted EBITDA shall exclude losses associated
with the ConocoPhillips-Ferndale, Washington project which have occurred
prior to January 1, 2007."
Section 2.3 Waiver.
(a) Bank hereby waives any non-compliance by the Borrower with Section
4.4(c) of the Original Credit Agreement for the month's ending November 31,
2006 and December 31, 2006 and Bank agrees that the Borrower shall not be
deemed in Default, nor shall any Event of Default be deemed to have
existed, solely by reason of any such non-compliance.
(b) Bank hereby waives any non-compliance by the Borrower with Section 5.17
of the Original Credit Agreement for the fiscal year ending December 31,
2006 and Bank agrees that the Borrower shall not be deemed in Default, nor
shall any Event of Default be deemed to have existed, solely by reason of
any such non-compliance during such fiscal year; provided Borrower's actual
expenditures or commitments to acquire fixed assets by lease, purchase or
otherwise for the fiscal year ending December 31, 2006 do not exceed in the
aggregate $3,500,000.
(c) The foregoing waivers shall not be deemed to be a waiver by the Bank of
any other covenant, condition or obligation on the part of the Borrower
under the Original Credit Agreement or any other Loan Document, except as
set forth in this Section 2.3. In addition, the foregoing waivers shall in
no respect evidence any commitment by the Bank to grant any future consents
or waivers of any covenant, condition or obligation on the part of the
Borrower under the Original Credit Agreement or any other Loan Document.
Any further waivers or consents must be specifically agreed to in writing
in accordance with Section 7.10.
Section 2.4 The Defined Terms Addendum to the Original Credit Agreement is
hereby amended by deleting the definition of "Agreement" and substituting
therefor the following:
"'Agreement' shall mean this Credit Agreement, including the Defined Terms
Addendum and the Loan Terms, Conditions and Procedures Addendum, together
with all exhibits and schedules, as amended by the First Amendment, Second
Amendment, Third Amendment, Fourth Amendment, Fifth Amendment, and Sixth
Amendment, and as it may be further amended from time to time."
Section 2.5 The Defined Terms Addendum to the Original Credit Agreement is
hereby amended by adding the following definitions thereto:
"'Sixth Amendment' shall mean that certain Sixth Amendment to Credit
Agreement effective as of December 31, 2006 among Borrower and Bank."
ARTICLE III Conditions of Effectiveness
---------------------------------------
Section 3.1 Effective Date. This Amendment shall become effective as of the
date first above written when and only when Bank shall have received, at Bank's
office,
(a) a duly executed counterpart of this Amendment to be executed by
Borrower;
(b) a duly executed counterpart of the No Oral Agreements of even date
herewith to be executed by Borrower; and
(c) each other document to be executed and delivered by Borrower pursuant
hereto or thereto.
ARTICLE IV Representations and Warranties
-----------------------------------------
Section 4.1 Representations and Warranties of Borrower. In order to induce
Bank to enter into this Amendment, Borrower represents and warrants to Bank
that:
(a) The representations and warranties contained in Section 3 of the
Original Credit Agreement are true and correct at and as of the time of the
effectiveness hereof;
(b) Borrower is duly authorized to execute and deliver this Amendment and
the other Amendment Documents and is and will continue to be duly
authorized to borrow and to perform its obligations under the Credit
Agreement. Borrower has duly taken all corporate action necessary to
authorize the execution and delivery of this Amendment and the other
Amendment Documents and to authorize the performance of the obligations of
Borrower hereunder and thereunder. The Omnibus Certificate of each Borrower
delivered to Bank on the date of the Original Credit Agreement remains in
full force and effect, and the specimen signatures of the officers
contained in the Omnibus Certificate are true and correct;
(c) The execution and delivery by Borrower of this Amendment and the other
Amendment Documents, the performance by Borrower of its obligations
hereunder and thereunder and the consummation of the transactions
contemplated hereby do not and will not conflict with any provision of law,
statute, rule or regulation or the bylaws or partnership agreement of
Borrower, or of any material agreement, judgment, license, order or permit
applicable to or binding upon Borrower, or result in the creation of any
lien, charge or encumbrance upon any assets or properties of Borrower.
Except for those which have been duly obtained, no consent, approval,
authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by Borrower
of this Amendment and the other Amendment Documents or to consummate the
transactions contemplated hereby and thereby;
(d) When duly executed and delivered, each of this Amendment and the other
Amendment Documents will be a legal and binding instrument and agreement of
Borrower, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency and similar laws applying to creditors' rights
generally and by principles of equity applying to creditors' rights
generally; and
(e) No material adverse change has occurred in the financial condition or
businesses or in the consolidated financial condition or businesses of
Borrower since the date of the most recently delivered financial
statements.
ARTICLE V Miscellaneous
-----------------------
Section 5.1 Ratification of Agreement. The Original Credit Agreement as
hereby amended is hereby ratified and confirmed in all respects. Any reference
to the Credit Agreement in any Loan Document shall be deemed to refer to this
Amendment also. The execution, delivery and effectiveness of this Amendment and
the other Amendment Documents shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Bank under the Credit
Agreement or any other Loan Document nor constitute a waiver of any provision of
the Credit Agreement or any other Loan Document.
Section 5.2 Survival of Agreements. All representations, warranties,
covenants and agreements of Borrower herein shall survive the execution and
delivery of this Amendment and the performance hereof, and shall further survive
until all of the Indebtedness is paid in full. All statements and agreements
contained in any certificate or instrument delivered by Borrower hereunder or
under the Credit Agreement to Bank shall be deemed to constitute representations
and warranties by, or agreements and covenants of, Borrower under this Amendment
and under the Credit Agreement.
Section 5.3 Loan Documents. This Amendment and the other Amendment
Documents are each a Loan Document, and all provisions in the Credit Agreement
pertaining to Loan Documents apply hereto and thereto.
Section 5.4 Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas and any applicable
laws of the United States of America in all respects, including construction,
validity and performance.
Section 5.5 Counterparts; Fax. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment. This Amendment may be duly executed by facsimile or other electronic
transmission.
THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
---------------------------------------
IN WITNESS WHEREOF, this Amendment is effective as of December 31, 2006.
BORROWER:
ENGLOBAL CORPORATION,
a Nevada corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL CORPORATE SERVICES, INC.,
a Texas corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL ENGINEERING, INC.,
a Texas corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL CONSTRUCTION
RESOURCES, INC., a Texas corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL SYSTEMS, INC.,
a Texas corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
RPM ENGINEERING, INC.,
a Louisiana corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL TECHNICAL SERVICES, INC.,
a Texas corporation, formerly known as
ENGlobal Design Group, Inc.
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL AUTOMATION GROUP, INC.,
a Texas corporation, formerly known as
ENGlobal Technologies, Inc.
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
PEI INVESTMENTS, A TEXAS JOINT
VENTURE, a Texas general partnership
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL CANADA ULC,
an Alberta corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
WRC CORPORATION,
a Colorado corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
WRC CANADA LTD.,
an Alberta corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
BANK:
COMERICA BANK
By:
--------------------------------------
Xxxxx X. XxXxxx,
Xx. Vice President--Texas Division
