FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (herein called this "Amendment")
is executed on the date set forth on the signature pages but is made effective
as of July 26, 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"), 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, and a Fourth Amendment to Credit Agreement dated
as of December 31, 2005, 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 Fifth 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 Sections 4.3(c), (d) and (e) of the Original Credit Agreement
are modified by deleting "thirty (30) days" in each instance and substituting
"forty-five (45) days" therefor.
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 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."
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Section 2.3 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, and Fifth Amendment, and as
it may be further amended from time to time."
Section 2.4 The Defined Terms Addendum to the Original Credit Agreement is
hereby amended by adding the following definitions thereto:
"'Fifth Amendment' shall mean that certain Fifth Amendment to Credit
Agreement as of July 26, 2006 among Borrower and Bank."
Section 2.5 The Defined Terms Addendum to the Original Credit Agreement is
hereby amended by deleting "July 26, 2007" from the definition of "Revolving
Credit Maturity Date" and substituting "July 26, 2009" in place thereof.
Section 2.6 The Defined Terms Addendum to the Original Credit Agreement is
hereby amended by deleting the definition of "Revolving Credit Maximum Amount"
and substituting therefore the following:
"'Revolving Credit Maximum Amount' shall mean THIRTY MILLION DOLLARS
($30,000,000)."
Section 2.7 The Defined Terms Addendum to the Original Credit Agreement is
hereby amended by deleting the definition of "Revolving Credit Note" and
substituting therefore the following:
"'Revolving Credit Note' shall mean the Master Revolving Note-Eurodollar
Rate-Maturity Date-Committed dated July 27, 2004, in the original principal
amount of $22,000,000 made by Borrower payable to the order of the Bank, as
renewed, extended, modified, and enlarged on July 26, 2006, to the amount
of $30,000,000 made by Borrower payable to the order of the Bank, in
accordance with the terms of the Fifth Amendment of even date therewith,
and as renewed, extended, modified, increased or restated from time to
time."
Section 2.8 The Loan Terms, Conditions and Procedures Addendum to the
Original Credit Agreement is hereby amended by deleting Section 1.9(a) and
substituting therefor the following:
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"(a) Letters of Credit. Subject to the terms and conditions of this
Agreement and the other Loan Documents, the Bank shall, upon request from
Borrower from time to time prior to the Revolving Credit Maturity Date,
issue one or more Letters of Credit. The Letter of Credit Liabilities shall
not exceed $1,000,000, provided that, at all times the sum of (i) the
outstanding principal balance of all Revolving Loans plus (ii) the Letter
of Credit Liabilities shall not exceed the Revolving Credit Maximum Amount.
Letters of Credit may be issued to finance working capital needs. Each
Letter of Credit issued pursuant to this Agreement shall be in a minimum
amount of $25,000. No Letter of Credit shall have a stated expiration date
later than thirty (30) days prior to the Revolving Credit Maturity Date."
Section 2.9 Schedule 3.5 to the Original Credit Agreement is hereby amended
and replaced in its entirety by Schedule 3.5 attached to this Amendment.
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 Master Revolving Note-Eurodollar Rate-Maturity Date-Committed of
even date herewith to be executed by Borrower;
(c) an Act of Supplement and Amendment and Notice of Reinscription of
Act of Mortgage and Security Agreement of even date herewith to be executed
by RPM Engineering, Inc. and recorded in East Baton Rouge Parish,
Louisiana;
(d) a Security Agreement (Accounts Receivable and Equipment) of even
date herewith to be executed by PEI Investments, a Texas Joint Venture,
ENGlobal Canada ULC, WRC Corporation, and WRC Canada Ltd.;
(e) a duly executed counterpart of the No Oral Agreements of even date
herewith to be executed by Borrower
(f) a duly executed certificate of the partners, chief financial
officer and secretary of each of PEI Investments, a Texas Joint Venture,
ENGlobal Canada ULC, WRC Corporation, and WRC Canada Ltd. certifying that
(i) resolutions of its board of directors attached to the Original Omnibus
Certificate authorizing the execution, delivery, and performance of this
Amendment and identifying the officers authorized to sign such instrument
are in full force and effect and (ii) the specimen signatures of the
officers so authorized which were attached to the Original Omnibus
Certificate are true and correct; and
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(g) 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
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(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]
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IN WITNESS WHEREOF, this Amendment is effective as of July 26, 2006.
BORROWER:
ENGLOBAL CORPORATION,
a Nevada corporation
By:
--------------------------------------
X.X. Xxxxxxx,
Chief Financial Officer and Treasurer
ENGLOBAL CORPORATE SERVICES, INC.,
a Texas corporation
s
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
SCHEDULE 3.5
Subsidiaries
------------
Subsidiaries of ENGlobal Corporation:
ENGlobal Corporate Services, Inc., a Texas corporation
ENGlobal Engineering, Inc., a Texas corporation
RPM Engineering, Inc., a Louisiana corporation
ENGlobal Construction Resources, Inc., a Texas corporation
ENGlobal Systems, Inc., a Texas corporation
ENGlobal Automation Group, Inc., a Texas corporation, f/k/a ENGlobal
Technologies, Inc.
ENGlobal Technical Services, Inc., a Texas corporation, f/k/a ENGlobal Design
Group, Inc.
PEI Investments, a Texas Joint Venture, a Texas general partnership
ENGlobal Canada ULC, an Alberta corporation
WRC Corporation, a Colorado corporation
WRC Canada Ltd., an Alberta corporation
