Loan and Security Agreement

by and among

ENGLOBAL CORPORATION,
ENGLOBAL U.S., INC.
and
ENGLOBAL GOVERNMENT SERVICES, INC.,
as the “Borrowers”

ENGLOBAL INTERNATIONAL, INC.
and
ENGLOBAL EMERGING MARKETS, INC.,
as the “Subsidiary Guarantors”

and

REGIONS BANK
as the “Lender”

September 16,  2014
 
 

 

 
 
 

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TABLE OF CONTENTS
 

             
Page
1.
DEFINITIONS AND RELATED TERMS
1
         
1.1
Certain UCC Terms
1
 
1.2
Defined Terms
1
 
1.3
Financial Terms
21
 
1.4
Rules of Construction
21
     
2.
THE CREDIT FACILITY
22
       
2.1
The Commitments
22
 
2.2
The Notes
22
 
2.3
Interest
22
 
2.4
Requesting New Loans
24
 
2.5
Requests for Borrowings; Conversions
24
 
2.6
Excess Outstandings
25
 
2.7
Repayment of Loans
25
 
2.8
Lockboxes; Collections Accounts
27
 
2.9
Letters of Credit
28
 
2.10
Fees
29
 
2.11
Statement of Account
30
 
2.12
Termination
30
 
2.13
USA Patriot Act Notice
30
     
3.
SECURITY AGREEMENT
31
       
3.1
Security Interest
31
 
3.2
Financing Statements; Fixture Filings; Power of Attorney
32
 
3.3
Entry
32
 
3.4
Other Rights
33
 
3.5
Accounts
33
 
3.6
Intentionally Omitted
33
 
3.7
Waiver of Marshaling
33
 
3.8
Control; Further Assurances
33
     
4.
CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT
33
         
4.1
Conditions Precedent to Initial Loans
33
 
4.2
Conditions Precedent to Each Loan and Letter of Credit
36
     
5.
REPRESENTATIONS AND WARRANTIES
37
         
5.1
Valid Existence and Power
37
 
5.2
Authority
38
 
5.3
Financial Condition
38

 
 
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TABLE OF CONTENTS
(continued)
 
Page
 

 
5.4
Litigation
38
 
5.5
Agreements, Etc
39
 
5.6
Authorizations
39
 
5.7
Title
39
 
5.8
Collateral
39
 
5.9
Jurisdiction of Organization; Location
40
 
5.10
Taxes
40
 
5.11
Labor Law Matters
40
 
5.12
Accounts
41
 
5.13
Judgment Liens
41
 
5.14
Organization Structure
41
 
5.15
Deposit Accounts
42
 
5.16
Environmental
42
 
5.17
ERISA
42
 
5.18
Investment Company Act
43
 
5.19
Insider
44
 
5.20
Sanctioned Persons; Sanctioned Countries
44
 
5.21
Compliance with Covenants; No Default
44
 
5.22
Full Disclosure
44
 
5.23
Collateral Disclosure Certificates
44
 
5.24
[Intentionally Omitted]
44
 
5.25
Brokers
44
 
5.26
Inactive Subsidiaries
44
     
6.
AFFIRMATIVE COVENANTS
45
         
6.1
Use of Loan Proceeds
45
 
6.2
Maintenance of Business and Properties
45
 
6.3
Insurance
45
 
6.4
Certain Notices
46
 
6.5
Inspections of Books and Records and Field Examinations; Appraisals; Physical
Inventories
46
 
6.6
Financial Information
47
 
6.7
Maintenance of Existence and Rights
49
 
6.8
Payment of Taxes, Etc
49
 
6.9
Subordination
49
 
6.10
Compliance; Hazardous Materials
50
 
6.11
Further Assurances
50
 
6.12
[Intentionally Omitted]
50
 
6.13
[Intentionally Omitted]
50
 
6.14
Covenants Regarding Collateral
50

 
 
 
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TABLE OF CONTENTS
(continued)
 
Page
 
7.
NEGATIVE COVENANTS
51
         
7.1
Debt
51
 
7.2
Liens
52
 
7.3
Restricted Payments; Prepayments; Payments on Subordinated Debt
53
 
7.4
Loans and Other Investments
54
 
7.5
Change in Business; Activities Covered by Insurance
54
 
7.6
Accounts
54
 
7.7
Transactions with Affiliates
55
 
7.8
No Change in Name, Offices, or Jurisdiction of Organization; Trade Names;
Removal of Collateral
55
 
7.9
No Sale, Leaseback
55
 
7.10
Margin Stock
55
 
7.11
Tangible Collateral
56
 
7.12
Subsidiaries
56
 
7.13
Liquidation, Mergers, Consolidations, and Dispositions of Assets; Good Standing
56
 
7.14
Change of Fiscal Year or Accounting Methods
56
 
7.15
Deposit Account; Exclusive Control
57
 
7.16
Material Agreements
57
 
7.17
Disqualified Equity Interest
57
 
7.18
Negative Pledge
57
 
7.19
Trading with Enemy Act
57
 
7.20
Inactive Subsidiaries
57
     
8.
FINANCIAL COVENANTS
58
         
8.1
Definitions
58
 
8.2
Financial Covenants
58
     
9.
DEFAULT
59
         
9.1
Events of Default
59
 
9.2
Remedies
61
 
9.3
Receiver
63
 
9.4
Deposits; Insurance
63
 
9.5
Set Off
63
       
10.
MISCELLANEOUS
63
         
10.1
No Waiver; Remedies Cumulative
63
 
10.2
Survival of Representations
63
 
10.3
Indemnity By Borrower; Expenses
63
 
10.4
Notices
65

 
 
 
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TABLE OF CONTENTS
(continued)
 
Page
 

         
10.5
Governing Law
65
 
10.6
Successors and Assigns
66
 
10.7
Counterparts; Telecopied Signatures
66
 
10.8
No Usury
66
 
10.9
Powers
66
 
10.10
Approvals; Amendments
66
 
10.11
Participations and Assignments
67
 
10.13
Waiver of Certain Defenses
68
 
10.14
Additional Provisions
69
 
10.15
Integration; Final Agreement
69
 
10.16
LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES
69
 
10.17
WAIVER OF JURY TRIAL
69
 
10.18
Submission to Jurisdiction; Venue
69
 
10.19
Credit Inquiries
70
 
10.20
Information
70
 
10.21
No Tax Advice
71
 
10.22
No Advisory or Fiduciary Responsibility
71
 
10.23
WAIVER IN REGARD TO CECPTIVE TRADE PRACTICES ACT; NON-APPLICABILITY OF CHAPTER
346
71

 
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EXHIBITS AND SCHEDULES

EXHIBITS:
         
Exhibit A
-
Form of Revolving Note
Exhibit B
-
Form of Notice of Borrowing
Exhibit 6.6(d)
-
Form of Compliance and No Default Certificate
           
SCHEDULES:
         
Schedule 5.3
-
Direct or Contingent Obligations and Liabilities
Schedule 5.4
-
Pending or Threatened Litigation
Schedule 5.8(b)
-
Insurance Policies
Schedule 5.8(c)
-
Trademarks, Patents and Copyrights
Schedule 5.9
-
Collateral Location
Schedule 5.11
-
Labor Law Matters
Schedule 5.14
-
Organizational Structure
Schedule 5.15
-
Deposit Accounts
Schedule 5.16
-
Environmental
Schedule 5.17
-
ERISA Plans
Schedule 7.1
-
Scheduled Permitted Debt
Schedule 7.2
-
Scheduled Permitted Liens
Schedule 7.7
-
Transactions with Affiliates

 
 
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LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (the “Agreement”), dated as of September  16,
2014, is made by and between: (i) ENGLOBAL CORPORATION,  a Nevada corporation
(“ENGlobal Holdings”), ENGLOBAL U.S., INC., a Texas corporation (“ENGlobal
U.S.”),  and ENGLOBAL GOVERNMENT SERVICES, INC.,  a Texas corporation (“ENGlobal
Government;” ENGlobal Government, together with ENGlobal U.S. and ENGlobal
Holdings,  and together with any Subsidiary that becomes a “Borrower” hereafter
pursuant to the operation and effect of Section 7.12, hereinafter sometimes
collectively called “Borrowers” and individually called a “Borrower”); (ii)
ENGLOBAL INTERNATIONAL, INC.,  a corporation organized under the BVI Business
Companies Act of 2004, as amended  (“ENGlobal International”) and ENGLOBAL
EMERGING MARKETS, INC., a Texas corporation (“ENGlobal Emerging Markets;”
ENGlobal Emerging Markets, together with ENGlobal International, and together
with any Subsidiary that becomes a “Subsidiary Guarantor” hereafter pursuant to
the operation and effect of Section 7.12, hereinafter sometimes collectively
called “Subsidiary Guarantors” and individually called a “Subsidiary Guarantor”;
and the Subsidiary Guarantors,  together with the Borrowers, hereinafter
sometimes collectively called the “Obligors” and individually called an
“Obligor”);  and (iii) REGIONS BANK, an Alabama bank (together with its
successors and permitted assigns, “Lender”).
 
W I T N E S S E T H :

In consideration of the premises and of the mutual covenants herein contained
and to induce Lender to extend credit to Borrowers, Obligors and Lender  agree
as follows:
 
1. DEFINITIONS AND RELATED TERMS.
 
1.1 Certain UCC Terms.  Any term used in this Agreement or in any financing
statement filed in connection herewith which is defined in the UCC and not
otherwise defined in this Agreement or in any other Loan Document shall have the
meaning given to the term in the UCC, including, without limitation, Good Faith,
Accession, Account Debtor, Chattel Paper, Account, Commercial Tort Claim,
Deposit Account, Document, Electronic Chattel Paper, Equipment, Fixture,
Instrument, Inventory, Investment Property, Letter-of-Credit Right, Proceeds,
Supporting Obligation and Tangible Chattel Paper.
 
1.2 Defined Terms.  Except as provided in Section 1.1, capitalized terms that
are not otherwise defined herein shall have the meanings set forth in this
Section 1.2.  Certain terms relating to financial covenants are set forth in
Section 8.
 
“Accounts Payable Report” has the meaning given such term in Section 6.6(a).
 
“Accounts Receivable Report” has the meaning given such term in Section 6.6(a).
 
“Affiliate” means, with respect to any Person, other than Lender, (a) any other
Person directly or indirectly owning ten percent (10%) or more of the Equity
Interests of such Person or of which such Person owns ten percent (10%) or more
of such Equity Interests; and (b) any other Person controlling, controlled by,
or under common control with such Person.  As used in this definition, “control”
means the power to control, or have a controlling influence over,  the
management or policies of a Person, whether by the voting of Equity
Interests,  by contract or otherwise.
 
 
 

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“Applicable Margin” means (a) as to Revolving Loans made as LIR Loans, a rate
per annum of two and 25/100ths of one percent (2.25%); and (b) as to Revolving
Loans made as Base Rate Loans because of the operation of Section 2.3(g), a rate
per annum of one and 25/100ths of one percent (1.25%).

“Approved Cash Investments” means deposits made by Obligors with Regions Bank or
one or more Lender Affiliates of either (i) cash or (ii) cash equivalents,  if
and to the extent reviewed with and approved by Lender from time to time.

“Approved Contract” means either an Approved Cost Plus Contract, an Approved
Fixed Price Contract or an Approved Government Contract.
 
“Approved Contract Party” is any Person other than an Affiliate of an
Obligor,  a Sanctioned Person, a Person located outside the United States of
America or a Person otherwise determined by Lender, in its Permitted Discretion,
not to be an Approved Contract Party.
 
“Approved Cost Plus Contract” means any contract (other than any Caspian
Contracts and any contract which requires that the applicable Borrower post any
bond to assure performance) of any Borrower with an Approved Contract Party,
other than a Governmental Entity,  in which the amount owing is based on cost
plus time and materials, which contract is in form and substance satisfactory to
Lender in its Permitted Discretion.
 
“Approved Fixed Price Contract” means any contract (other than any Caspian
Contracts  and any contract which requires that the applicable Borrower post any
bond to assure performance) of any Borrower with an Approved Contract Party,
other than a Governmental Entity, in which the amount owing is based on a fixed
price, which contract has a stated term from beginning of work to completion of
work of not more than ninety (90) days (or one hundred twenty (120) days in the
case of the Canrig Contract),  and otherwise is  in form and substance
satisfactory to Lender in its Permitted Discretion.
 
“Approved Government Contract” means any contract (other than any contract which
requires  that the applicable Borrower post any bond to assure performance) of
any Borrower with an Approved Contract Party that is a Governmental Entity on
which the applicable Borrower can assign its right to payment under such
contract to Lender pursuant to the Assignment of Claims Act of 1940 as amended
or any similar state statute or regulation applicable thereto, provided that
such Borrower uses Lender’s cash management system to control the remittance
thereof  and otherwise has complied with all other applicable federal, state and
local statutes, regulations or ordinances in regard thereto,  and which contract
otherwise  is in form and substance satisfactory to Lender in its Permitted
Discretion.

“Aspen Note” means that certain Subordinated Non-Negotiable Promissory Note
dated July 8, 2011, in the face amount of $514,277.96,  from Aspen Power, LLC
and Aspen Pipeline, LP, as makers, made payable to ENGlobal U.S., as payee, as
it may be modified or amended from time to time, and together with all
extensions thereto, renewals thereof and substitutions and additions thereto.

 
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 “Bank Products” means all bank, banking, financial, and other similar or
related products and services, including, without limitation, (a) merchant card
services, credit cards or stored value cards, and purchasing cards; (b) cash
management or related services, including, without limitation, the automated
clearing house (ACH) transfers of funds and any other ACH services, remote
deposit capture services, account reconciliation services, lockbox services,
depository and checking services, fraud protection services, Deposit Accounts,
securities accounts, controlled disbursement services, and wire transfer
services; (c) bankers’ acceptances, drafts, Letters of Credit or letters of
credit (and the issuance, amendment, renewal, or extension thereof), documentary
services, foreign currency exchange services; (d) Approved Cash Investments; and
(e) Hedge Agreements.
 
“Base Rate” means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greatest
of (a) the Federal Funds Rate in effect on such day plus ½ of 1%, or (b) the
Prime Rate in effect on such day or (c) a per annum rate equal to LIBOR
determined with respect to an interest period of one month  plus one percent
(1%). If for any reason Lender shall have determined (which determination shall
be conclusive absent manifest error) that it is unable, after due inquiry, to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of Lender to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to clause (a) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate due to a change in the
Federal Funds Rate or the  Prime Rate shall be effective on the effective date
of such change in Federal Funds Rate or the Prime Rate, respectively.
 
“Base Rate Loan” means a Loan, or portion thereof, during any period in which it
bears interest at a rate based on the Base Rate.  No Loan shall be a Base Rate
Loan unless required or permitted by Section 2.3(g).
 
“Borrower” and “Borrowers” shall have the meaning ascribed thereto in the
preamble to this Agreement.
 
“Borrower Agent” means ENGlobal Holdings.
 
“Borrowing Base” means, on any date of determination, an amount equal to:
 
(a)            eighty-five percent (85%) of the total amount of Eligible
Approved Cost Plus Contract Accounts, plus
 
(b)            the lesser of (1)  eighty-five percent (85%) of the total amount
of Eligible Approved Fixed Price Contract Accounts, or (2) Two Million Five
Hundred Thousand Dollars ($2,500,000); plus
 
(c)            the lesser of (1)  eighty-five percent (85%)  of the total amount
of Eligible Approved Government Contract Accounts, or (2) One Million Dollars
($1,000,000); plus
 
 
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(d)            the lesser of (1)  seventy-five percent (75%) of the total amount
of Eligible Unbilled Accounts, or (2) total revenues from all Accounts over the
preceding thirty (30) day period; provided that, to the extent that any Eligible
Unbilled Accounts consist of Accounts that would  be Eligible Approved
Government Contracts and be included in clause (c) above if billed there shall
be a limitation in eligibility thereof under this clause (d) of Eight Hundred
Thousand Dollars ($800,000);  plus
 
(e)           seventy-five percent (75%) of the total amount of Eligible Costs
in Excess of Billings; less
 
(f)           any Reserves.
 
“Borrowing Base Certificate” has the meaning set forth in Section 6.6(a).
 
“Business Day” means (a) any week day on which Lender is open for business in
Atlanta, Georgia, Birmingham, Alabama, and Dallas, Texas, and (b) with respect
to all matters relating to the determination of the LIBOR Index Rate, any day
that is also a day for trading by and between banks in U.S. dollar deposits in
the London interbank market.
 
“Canrig”  means Canrig Drilling Technology, Ltd., a Delaware corporation.
 
“Canrig Contract”  means and includes the Master Services Agreement, dated May
25, 2011, between Canrig and ENGlobal U.S. together with all work orders and
schedules issued now or hereafter pursuant thereto; in each case,  together with
all supplements and additions thereto, and as modified or amended from time to
time as and to the extent  permitted by this Agreement.
 
“Capital Expenditures” means, for any period, the aggregate cost of all capital
assets acquired by Obligors and their respective Subsidiaries during such period
(including gross leases to be capitalized under GAAP and leasehold
improvements), as determined in accordance with GAAP.
 
“Caspian Contracts”  means and includes (i) that certain agreement by and among
ENGlobal U.S. and Closed Joint Stock Company Caspian Pipeline Consortium—R, a
company organized pursuant to the laws of the Russian Federation,  dated May 16,
2011, and (ii) that certain Agreement by and among ENGlobal U.S. and Joint Stock
Company Caspian Pipeline Consortium—K, a company organized pursuant to the laws
of the Republic of Kazakhstan dated May 16, 2011; in each case,  together with
all supplements and additions thereto, and as modified or amended from time to
time as and to the extent  permitted by this Agreement.

“Change of Control”  means either:  (a) any Obligor shall fail to employ or
engage a chief executive officer acceptable to Lender in its Permitted
Discretion for a period in excess of ninety (90) days without the employment or
engagement of a replacement chief executive officer acceptable to Lender in its
Permitted Discretion;  or (b) any  Person  or group of Persons (within the
meaning of the Securities Exchange Act of 1934) shall have acquired beneficial
ownership within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934), other than the
owners of Equity Interests of ENGlobal Holdings on the Closing Date,  fifty
percent (50%) or more of the Equity Interests of ENGlobal  Holdings  having the
right to vote for the election of the directors of ENGlobal Holdings under
ordinary circumstances; or  (c)  ENGlobal  Holdings shall cease to own  and
control at all times all of the Equity Interests of ENGlobal U.S., ENGlobal
International and ENGlobal Government; (d)  ENGlobal  U.S.  shall cease to
own  and control at all times all of the Equity Interests of ENGlobal Emerging
Markets; or (e)  with regard to ENGlobal Holdings, during any period of twelve
(12) consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors  of ENGlobal Holdings (together with
any new directors whose election by the board of directors of ENGlobal Holdings
or whose nomination for election by the stockholders of ENGlobal Holdings was
approved by the vote of at least two-thirds of the directors then still in
office who  either  were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason other than death or disability to constitute a majority of the directors
then in office.
 
 
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“Closing Date” means the date on which all of the conditions precedent in
Section 4 of this Agreement are satisfied (or waived by Lender in accordance
with the terms of this Agreement) and the initial extensions of credit are made
under this Agreement.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Collateral” means all property of each Obligor, wherever located and whether
now owned by such Obligor or hereafter acquired, including but not limited to
(a) all Inventory; (b) all General Intangibles; (c) all Accounts; (d) all
Chattel Paper; (e) all Instruments and Documents and any other instrument or
intangible representing payment for goods or services; (f) all Equipment; (g)
all Investment Property; (h) all Commercial Tort Claims; (i) all
Letter-of-Credit Rights; (j) all Deposit Accounts and funds on deposit therein,
including but not limited to any Funding Account, Collections Account, and funds
otherwise on deposit with or under the Control of Lender or its agents or
correspondents, and all Approved Cash Investments; (k) all Fixtures and (l) all
parts, replacements, substitutions, profits, products, Accessions, cash and
non-cash Proceeds, and Supporting Obligations of any of the foregoing
(including, but not limited to, insurance proceeds) in any form and wherever
located.  Collateral also includes (x) all written or electronically recorded
books and records relating to any such Collateral and other rights relating
thereto and (y) any other real or personal property as to which Lender, at any
time of determination, has a Lien to secure the Obligations; provided, however,
that, notwithstanding the foregoing, unless otherwise expressly provided to the
contrary in the applicable Security Document, in no event shall the term
“Collateral” include: (i) any Equity Interests of a Foreign Subsidiary issued to
an Obligor exceeding sixty-six and two-thirds  percent (66-2/3%) of the total
combined voting power of all Equity Interests of such Foreign Subsidiary; (ii)
any lease, contract, license or permit, or any asset subject to a purchase money
Lien permitted under this Agreement, in each case if, to the extent that and for
as long as (a) the grant of a security interest therein constitutes or would
result in the termination of, breach of or a default under the lease, instrument
or agreement by which such lease, contract, license or permit is governed, or
the agreement giving rise to such Purchase Money Lien, as applicable, and (b)
such termination, breach or default is not rendered ineffective pursuant to
Sections 9-401, 9-406(d), 9-407, 9-408 or 9-409 of the UCC, provided, that (1)
such lease, contract, license, permit or assets will be excluded from the
Collateral only to the extent and for as long as the conditions set forth in the
foregoing clauses (a) and (b) are and remain satisfied and to the extent such
assets otherwise constitute Collateral, will cease to be excluded, and will
become subject to the Liens hereunder, immediately and automatically at such
time as such conditions cease to exist, including by reason of any waiver or
consent under the applicable lease, instrument or agreement, and (2) the
proceeds of any sale, lease or other disposition of any such lease, license or
permit, or any asset subject to a purchase money Lien, shall not be excluded
from the Collateral and shall at all times be and remain subject to the Liens
hereunder.  The existence of any of the foregoing exceptions shall not, however,
prevent Lender from filing financing statements that describe the Collateral as
“all personal property,” “all assets” or words of similar effect.
 
 
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“Collateral Disclosure Certificate” means a certificate, in a form provided by
or otherwise satisfactory to Lender, executed and delivered by a Credit Party to
Lender in accordance with or pursuant to the terms of this Agreement, as the
same may be amended, restated, supplemented, or otherwise modified from time to
time to the extent permitted or required herein.
 
“Collections Account” means any Deposit Account maintained by an Obligor with
Lender to which collections, deposits, and other payments on or with respect to
Collateral may be made pursuant to the terms hereof and to which only Lender
shall have access to withdraw or otherwise direct the disposition of funds on
deposit therein.
 
“Commitments” means the Revolving Loan Commitment and any other commitments that
Lender hereafter may make to Borrowers, or to any Borrower, hereunder or
pursuant hereto.
 
“Consolidated Companies” means Obligors and their respective consolidated
Subsidiaries.
 
“Control” means, with respect to any asset, right, or property with respect to
which a security interest therein is perfected by a secured party’s having
“control” thereof (whether pursuant to the terms of an agreement or through the
existence of certain facts and circumstances), that Lender has “control” of such
asset, right, or property in accordance with the terms of Article 9 of the UCC.
 
“Credit Party” means each Borrower, each Guarantor, each Obligor and each other
Person obligated to Lender under any Loan Document at any time or from time to
time.
 
“Debt” means all liabilities of a Person as determined under GAAP and all
obligations which such Person has guaranteed or endorsed or is otherwise
secondarily or jointly liable for, and shall include, without limitation, (a)
all obligations for borrowed money or purchased assets; (b) obligations secured
by assets whether or not any personal liability exists; (c) the capitalized
amount of any capital or finance lease obligations; (d) the unfunded portion of
pension or benefit plans or other similar liabilities; (e) obligations as a
general partner; (f) contingent obligations pursuant to guaranties,
endorsements, letters of credit and other secondary liabilities; (g) obligations
for deposits; and (h) obligations under Hedge Agreements.
 
“Default” means any event or circumstance which, upon satisfaction of any
requirement for the giving of notice or the lapse of time, or the happening of
any further condition, event, or act, would constitute an Event of Default.
 
 
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“Default Rate” means, as of any date, a rate per annum that is equal to (a) in
the case of each Loan outstanding on such date, a rate determined by Lender of
up to two percent (2.00%) in excess of the rate otherwise applicable to such
Loan on such date; (b) in the case of fees payable with respect to Letters of
Credit, a rate determined by Lender of up to two percent (2.00%) in excess of
the fees otherwise applicable to Letters of Credit; and (c) in the case of any
other Obligations outstanding on such date, a rate determined by Lender of up to
two percent (2.00%) in excess of the rate otherwise applicable thereto on such
date, or if no such rate is applicable thereto,  a rate per annum equal to the
Base Rate plus a rate determined by Lender of up to two percent (2.00%);
provided, however, that Obligations arising under any Hedge Agreement between
Obligors, or any Obligor, and Lender or any Lender Affiliate shall bear interest
at the rates and on the terms set forth in such Hedge Agreement.
 
 “Disqualified Equity Interests” means, with respect to any Person, any Equity
Interest that by its terms (or by the terms of any other Equity Interest into
which it is convertible or exchangeable) or otherwise (a) matures or is subject
to mandatory redemption or repurchase (other than solely for Equity Interests
that are not Disqualified Equity Interests) pursuant to a sinking fund
obligation or otherwise (except as a result of a change of control or asset sale
so long as any rights of the holder thereof upon the occurrence of a change of
control or asset sale event shall be subject to the full and final payment and
performance of the Obligations and the termination of the Commitment and any and
all of Lender’s obligations to extent credit or make final accommodations to
Borrowers or to a Borrower hereunder); (b) is convertible into or exchangeable
or exercisable for Debt or any Disqualified Equity Interest at the option of the
holder thereof; (c) may be required to be redeemed or repurchased at the option
of the holder thereof (other than solely for Equity Interests that are not
Disqualified Equity Interests), in whole or in part, in each case on or before
the date that is ninety (90) days after the stated Termination Date; or (d)
provides for scheduled payments of dividends to be made in cash.
 
“EBITDA” has the meaning given such term in Section 8.1.
 
“Eligible Accounts” means all of each Borrower’s Accounts owing by Account
Debtors that are Approved Contract Parties (valued at the face amount of such
invoice, minus the maximum discounts, credits, and allowances which may be taken
by such Account Debtors on such Accounts, and net of any sales tax, finance
charges, or late payment charges included in the amount invoiced) created or
acquired by such Borrower and arising from the rendering of services, in each
case, in such Borrower’s ordinary course of business pursuant to one or more
Approved Contracts, but excluding (without duplication), any such Accounts:
 
(a)           which are not denominated in U.S. dollars;
 
(b)           unless and except to the extent then constituting Eligible
Unbilled Accounts, which are not evidenced by a paper invoice or an electronic
equivalent acceptable to Lender;
 
(c)           over which Lender does not have a duly perfected, first-priority
(and only) Lien or which, by contract, subrogation, mechanics’ lien laws, or
otherwise, are subject to claims by a Borrower’s creditors or other third
parties or which are owed by Account Debtors as to whom any creditor of a
Borrower (including any bonding company or any subcontractor) has lien or
retainage rights;
 
 
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(d)           as to which any representation, warranty, or covenant herein
relating thereto shall be untrue, misleading, or in default provided, however,
that this clause (d) shall not (i) be deemed a waiver by Lender of any Default
or Event of Default which occurs under this Agreement or any other Loan Document
as a result of any such representation, warranty, or covenant being untrue or
misleading, or in default or (ii) limit the ability of Lender to institute
Reserves in connection therewith to the extent provided in this Agreement;
 
(e)           except in respect of Eligible Unbilled Accounts, outstanding for
longer than (i) one hundred twenty (120)  days from original invoice date or
(ii) sixty (60) days from the original due date, whichever is shorter;
 
(f)           owed by any Account Debtor if more than twenty-five percent (25%)
of the total Accounts then owed by such Account Debtor to an Obligor, or to
Obligors collectively,  are deemed ineligible pursuant to clause (e);
 
(g)           owed by any Affiliate of any Obligor;
 
(h)           owed by any creditor of such Obligor, but only to the extent of
such Obligor’s Debt to such creditor;
 
(i)           for which the Account Debtor disputes the liability or are
otherwise in dispute or are subject to any counterclaim, contra-account
(including those accounted for by Borrowers as “Billings in Excess of Cost”),
volume or other rebate, cooperative advertising accrual, deposit, offset,
deduction, discount, recoupment, reserve, chargeback, unissued credit or
allowance, but only, in each case,  to the extent thereof;
 
(j)           owing by any Account Debtor (and such Account Debtor’s
Affiliates), except for Canrig,  whose aggregate Accounts exceed fifteen percent
(15%) of the total of a Borrower’s or Borrowers’ (collectively) Eligible
Accounts, for all Account Debtors, provided that for Canrig,  the foregoing
percentage shall be increased to twenty-five percent (25%); but only, in each
case, for all such Account Debtors (including Canrig), to the extent of such
excess;
 
(k)           owing by any Account Debtor which is not Solvent or which is
subject to any proceeding of the types described in Section 9.1(g) or Section
9.1(h);
 
(l)           arising from a sale on a bill-and-hold, progress billing,
guaranteed sale, sale-or-return, sale-on-approval, consignment,
cash-on-delivery, or similar basis or due from any credit or charge card company
or any credit or charge card processor, servicer, or administrator;
 
(m)           owed by an Account Debtor which is a Sanctioned Person;
 
(n)           [Intentionally Omitted];
 
(o)           unless and except to the extent constituting  Eligible Approved
Government Contract Accounts, owed by the United States of America or any other
Governmental Entity;
 
(p)           (i) as to which the goods or services giving rise to such Account
(A) have not been delivered or provided to, and accepted by, the Account Debtor,
(B) are subject to repurchase or have been returned, rejected, repossessed,
lost, or damaged,  (C) have not been completely performed, as applicable, or (D)
are or are alleged to constitute infringing Goods or are or are alleged to have
been manufactured or sold in a manner which violates the trademark, patent,
copyright, or other intellectual property rights of any Person or (ii) which do
not represent a final sale to the Account Debtor;
 
 
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(q)           which is evidenced by a promissory note or other Instrument or
Chattel Paper or which has been reduced to judgment;
 
(r)           as to which Borrowers or Lender, in its Permitted Discretion,
shall have determined the validity, collectibility, or amount thereof to be
doubtful;
 
(s)           which constitutes a customer deposit;
 
(t)           owed by an Account Debtor which is located in a State or other
jurisdiction (including Alabama, New Jersey, Minnesota  and West Virginia) where
a Borrower is required, as a condition to access to its courts,  to qualify to
transact business or to file a business activities report or other report or
form, unless such Borrower has so qualified or filed such reports; or
 
(u)           which Lender, in its Permitted Discretion, otherwise determines to
not be Eligible Accounts.
 
To the extent applicable, “Eligible Accounts” shall not include aged credit
balances outstanding for longer than ninety (90) days.

As used herein, Eligible Accounts may include, subject to the limitations set
forth in the respective definitions thereof, Eligible Approved  Cost Plus
Contract Accounts, Eligible Approved Fixed Price Contract Accounts,  Eligible
Approved Government Contract Accounts,  Eligible Unbilled Accounts and Eligible
Costs in Excess of Billings.

“Eligible Approved Cost Plus Contract Accounts” means with respect to any
Borrower each Account of such Borrower arising in the ordinary course of its
business from an Approved Cost Plus Contract which satisfies all criteria set
forth in the  definition  of “Eligible Accounts.”  An Account shall not be
deemed an Eligible Approved Cost Plus contract Account unless such Account  is
subject to Lender’s first priority security interest and no other Lien (other
than Permitted Liens)  is evidenced by documentation satisfactory to Lender in
its Permitted Discretion and has been verified to Lender’s reasonable
satisfaction by field examination and other verifications from time to time
performed by Lender pursuant to the terms of this Agreement.

“Eligible Approved Fixed Price Contract Accounts” means with respect to any
Borrower each Account of such Borrower arising in the ordinary course of its
business from an Approved Fixed Price Contract which satisfies all criteria set
forth in the definition  of “Eligible Accounts.”  An Account shall not be deemed
an Eligible Approved Fixed Price Eligible Account unless such Account   is
evidenced by documentation satisfactory to Lender in its Permitted Discretion
and has been verified to Lender’s satisfaction by field examination and other
verification from time to time performed by Lender, in its Permitted
Discretion,  pursuant to the terms of this Agreement.

 
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 “Eligible Approved Government Contract Accounts” means with respect to any
Borrower each Account of such Borrower arising in the ordinary course of its
business pursuant to an Approved Contract which satisfies all criteria set forth
in the definition  of  “Eligible Accounts” other than clause (o) thereof.  An
Account shall not be deemed an Eligible Government Account unless such
Account   is evidenced by documentation satisfactory to Lender in its Permitted
Discretion and has been verified to Lender’s satisfaction  by field examination
and other verification from time to time performed by Lender, in its Permitted
Discretion,  pursuant to the terms of this Agreement.

 “Eligible Assignee” means a Person which is either (a) a Lender Affiliate; or
(b) a bank or other financial institution which has total assets in excess of
$500,000,000 selected or approved by Lender and, if no Event of Default then
exists, and the assignment is not being made in connection with the sale by
Lender of a portfolio of its then existing loans of which the Loans made
hereunder are a part, approved by Borrower Agent (which approval by Borrower
Agent shall not be unreasonably withheld, conditioned or delayed and shall be
deemed given if no objection is made within five (5) Business Days after notice
of the proposed assignment is delivered to Borrower Agent), and (c) during the
existence of any Event of Default, any Person selected by or acceptable to
Lender with notice to, but without necessity of obtaining any consent from,
Borrower Agent or any other credit Party.
 
 “Eligible Costs in Excess Of Billings,” for each Approved Fixed Price Contract,
means an amount equal to the positive difference  (if any) between (1) the
aggregate amount of all costs and expenses actually incurred by any Borrower  in
connection with such Borrower’s performance of its obligations under such
Approved Fixed Price Contract,  and (2) the aggregate amount of all such costs
and expenses actually billed under such Approved Fixed Price Contract, as
evidenced by documentation satisfactory to Lender in its Permitted Discretion,
net of any amounts  billed for such costs and expenses in excess of the
aggregate amount of all costs  and expenses actually incurred in connection with
any Borrower’s performance of its obligations pursuant to such  Approved Fixed
Price Contract. In addition, Eligible Costs In Excess of Billings shall cease to
be eligible if  it has not been invoiced and billed to the applicable Account
Debtor within sixty (60) days from service date.

Eligible Unbilled Accounts” means with respect to any Borrower each Account of
such Borrower arising in the ordinary course of its business pursuant to an
Approved Contract (i) representing services actually performed by such Borrower
and accepted by its Account Debtor under such Approved Contract, (ii) which in
accordance with the terms of  such Approved Contract, has not been fully
invoiced and billed to such Account Debtor by such Borrower and (iii) which
satisfies all criteria set forth in the definition  of “Eligible Accounts” other
than clauses (b), (e) and  (o)  thereof.  An Account shall cease to be an
Eligible Unbilled Account  if such Account has not been invoiced and billed to
the applicable Account Debtor within thirty (30) days from service date.

“ENGlobal Emerging Markets” shall have the meaning ascribed thereto in the
preamble to this Agreement.

 
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“ENGlobal Government” shall have the meaning ascribed thereto in the preamble to
this Agreement.

“ENGlobal Holdings” shall have the meaning ascribed thereto in the preamble to
this Agreement.
 
“ENGlobal International” shall have the meaning ascribed thereto in the preamble
to this Agreement.
 
“ENGlobal U.S.” shall have the meaning ascribed thereto in the preamble to this
Agreement.
 
“Environmental Laws” means, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980; the Superfund Amendments and
Reauthorization Act of 1986; the Resource Conservation and Recovery Act; the
Toxic Substances Act; the Clean Water Act; the Clean Air Act; the Oil Pollution
and Hazardous Substances Control Act of 1978; and any other “Superfund” or
“Superlien” law or any other Federal, state, or local statute, law, ordinance,
code, rule, regulation, order, or decree relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance, or material, as now or at any time hereafter in effect, in each case,
as the same may be amended from time to time.
 
“Equity Interest” means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interest in (however designated) equity of such Person,
including, without limitation, any common stock, preferred stock, limited or
general partnership interests, and limited liability company membership
interests, whether voting or non-voting.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with any Credit Party or any of its Subsidiaries within the
meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the
Code for purposes of provisions relating to Section 412 of the Code).
 
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Credit Party any of its Subsidiaries or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations that is treated as such a withdrawal under Section
4062(e) of ERISA or the termination of any such Pension Plan resulting in
liability pursuant to Sections 4063 or 4064 of ERISA; (c) a complete or partial
withdrawal by any Credit Party any of its Subsidiaries or any ERISA Affiliate
from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization or insolvency within the meaning of Title IV of ERISA or that it
intends to terminate or has terminated under Sections 4041A or 4042 of ERISA;
(d) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of ERISA, or the
commencement of proceedings by the PBGC to terminate a Pension Plan; (e) an
event or condition which constitutes grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; (f) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any Credit Party, any of its Subsidiaries, or any ERISA Affiliate;
(g) with respect to a Pension Plan, the failure of any Credit Party or any ERISA
Affiliate to satisfy the minimum funding standards of Sections 412 and 430 of
the Code and Sections 302 and 303 of ERISA, whether or not waived, or the
failure to make by its due date a required installment under Section 430(j) of
the Code or Section 303(j) of ERISA or the failure by any Credit Party or any
ERISA Affiliate to make any contribution to a Multiemployer Plan; (h) the
imposition of a Lien pursuant to Section 401(a)(29) or 430(k) of the Code or
pursuant to Section 303(k) of ERISA or a violation of Section 436 of the Code
with respect to any Pension Plan; (i) a Pension Plan is, or to the knowledge of
a Credit Party or an ERISA Affiliate, is reasonably expected to be, in "at-risk"
status within the meaning of Section 430(i)(4) of the Code or Section 303(i)(4)
of ERISA; or (j) a Multiemployer Plan, to the knowledge of a Credit Party or an
ERISA Affiliate (i) is in "endangered status" (under Section 432(b)(1) of the
Code or Section 305(b)(1) of ERISA or (ii) is in "critical status" (under
Section 432(b)(2) of the Code or Section 305(b)(2) of ERISA).
 
 
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 “Event of Default” has the meaning given such term in Section 9.1.
 
“Excess Availability” means, at any time of determination, the amount by which
(a) the lesser of (i) the Borrowing Base or (ii) the Revolving Loan
Commitment;  exceeds (b) total Working Capital Obligations.
 
“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations at approximately 10:00
a.m. (Birmingham, Alabama, time) for such day on such transactions received by
Lender from three (3) Federal Funds brokers of recognized standing selected by
it in its discretion.
 
“Fiscal Month,” “Fiscal Quarter,” and “Fiscal Year” means each of Obligors’
fiscal months, quarters, or years, as applicable.
 
“Fixed Charge Coverage Ratio” has the meaning given such term in Section 8.1.
 
“Foreign Plan” means any employee benefit plan or arrangement maintained or
contributed to by any Credit Party or Subsidiary which (a) is not subject to the
laws of the United States, (b) is maintained outside the United States primarily
for the benefit of Persons who are not citizens or residents of the United
States, or (c) is mandated by a Governmental  Entity (other then the United
States) for any employees of any Credit Party or Subsidiary.
 
Foreign Subsidiary” means a Subsidiary that is, as to any Borrower, a
“controlled foreign corporation” under Section 957 of the Code.
 
 
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“Funded Debt” has the meaning given such term in Section 8.1.
 
“Funding Account” means any Deposit Account maintained by an Obligor, or
Obligors collectively,  with Lender for the purpose of depositing the proceeds
of Loans.
 
“GAAP” means generally accepted accounting principles as in effect in the United
States from time to time as applicable to and applied by Obligors in their
historical financial statements as described in Section 5.3.
 
“General Intangibles” has the meaning set forth in the UCC, and includes,
without limitation, general intangibles of  each Obligor, whether now owned or
hereafter created or acquired by such Obligor, including all causes of action,
company or other business records, inventions, blueprints, designs, patents,
patent applications, trademarks, trademark applications, trade names, trade
secrets, service marks, goodwill, brand names, copyrights, registrations,
licenses, franchises, customer lists, permits, tax refund claims, computer
programs, operational manuals, internet addresses and domain names, insurance
refunds and premium rebates, all claims under guaranties, security interests or
other security held by or granted to such Obligor to secure payment of any of
such Obligor’s Accounts by an Account Debtor, all rights to indemnification and
all other intangible property of such Obligor of every kind and nature (other
than Accounts).
 
“Governmental Entity” means any (a) court (whether in law or at equity or trial
or appellate), tribunal, or arbitrator or arbitration proceeding and (b) any
local, city, state, Federal, municipal or quasi-municipal, foreign, or
international government or any subdivision, agency, authority, commission,
bureau, branch, regulatory body, or other body thereof.
 
“Guarantor” means any Person now or hereafter guaranteeing, endorsing, acting as
surety of, or otherwise becoming liable for any Obligations. As of the Closing
Date, the Guarantor Subsidiaries are the only Guarantors.
 
“Guaranty” means any guaranty of all or any Obligations now or hereafter
executed and delivered by any Guarantor to Lender, as the same may be amended,
restated, supplemented, or otherwise modified from time to time.
 
“Hedge Agreement” has the meaning for swap agreement as defined in 11 U.S.C. §
101, as in effect from time to time, or any successor statute, and includes,
without limitation, any rate swap agreement, forward rate agreement, commodity
swap, commodity option, interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement, rate cap agreement, rate floor
agreement, rate collar agreement, currency swap agreement, cross-currency rate
swap agreement, currency option and any other similar agreement.
 
“Inactive Subsidiary” means each of (i) ENGlobal Emerging Markets and (ii)
ENGlobal International.
 
“Inactive Subsidiary Dissolution” means the legal dissolution of either Inactive
Subsidiary to the extent made  in accordance with applicable law subsequent to
the Closing Date.
 
 
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 “Item” means any “item” as defined in Section 4-104 of the UCC, and shall also
mean and include checks, drafts, money orders or other media of payment.
 
“Jurisdiction” means the State of Texas.
 
“LC Obligations” means, at any time of determination, the aggregate undrawn and
unreimbursed amounts under all Letters of Credit.
 
“LC Sublimit” means Two Million Five Hundred Thousand Dollars ($2,500,000).
 
“Lender” means Regions Bank and its successors and permitted assigns.
 
“Lender Affiliate” means any direct or indirect Subsidiary of Lender or of its
holding company (which on the Closing Date, as relates to Regions Bank,  is
Regions Financial Corporation), existing from time to time.
 
“Letter of Credit” means a letter of credit issued by Lender for the account of
a Borrower or Borrowers, collectively, as provided in Section 2.1(a) and Section
2.10.
 
“LIBOR” means a per annum rate equal to the rate offered by prime banks in the
London interbank eurodollar market for deposits in United States dollars in an
amount comparable to the Loan for which such rate is being determined and for a
period equal to the interest period applicable thereto, all as determined by
Lender with reference to the financial information reporting service used by
Lender at the time of such determination.  Each calculation by Lender of LIBOR
shall be conclusive and binding for all purposes, absent manifest error.
 
“LIBOR Index Rate” means, for any LIR Loan and at any time of determination, a
per annum rate equal to LIBOR determined with respect to an interest period of
one month. The LIBOR Index Rate shall be determined daily on each Business Day
and shall be increased or decreased, as applicable, automatically and without
notice to any Person on the date of each such determination.  Upon Borrower
Agent’s  request from time to time, Lender will quote the then current LIBOR
Index Rate for borrowings hereunder as so determined pursuant hereto.
 
“LIBOR Reserve Requirements” means the maximum reserves (whether basic,
supplemental, marginal, emergency, or otherwise) prescribed from time to time by
the Board of Governors of the Federal Reserve System (or any successor) with
respect to liabilities or assets consisting of or including “Eurocurrency
liabilities” (as defined in Regulation D of the Board of Governors of the
Federal Reserve System).
 
“LIR Loan” means a Loan, or portion thereof, during any period in which it bears
interest at a rate based on the LIBOR Index Rate.
 
“Lien” means any lien (statutory or otherwise), mortgage, deed of trust, deed to
secure debt, pledge, hypothecation, security interest, trust arrangement,
security deed, financing lease, collateral assignment, encumbrance, conditional
sale or title retention agreement, or any other interest in property designed to
secure the repayment or performance of any obligation, whether arising by
agreement or under any statute or law or otherwise.
 
 
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“Loans” means the Revolving Loans.
 
“Loan Documents” means this Agreement and each other now existing or hereafter
arising document, agreement, or instrument evidencing, describing, guaranteeing,
or securing the Obligations or delivered in connection with this Agreement (but
excluding any Hedge Agreement between an Obligor, or Obligors collectively,  and
Lender or any Lender Affiliate), including, without limitation, each Security
Agreement, Note, Guaranty, Notice of Borrowing, Collateral Disclosure
Certificate, Borrowing Base Certificate, Third Party Agreement and UCC financing
statement, as the same may be amended, restated, supplemented, or otherwise
modified from time to time.
 
“Loss” has the meaning given such term in Section 6.3.
 
“Material Adverse Effect” means any event, circumstance or condition relating to
or affecting  (a) the validity, performance, or enforceability of any of the
Loan Documents or any of the transactions contemplated hereby or thereby; (b)
the properties, operations, business or condition (financial or otherwise) of
any Credit Party; or (c) the Collateral;  which, in each such case, could
reasonably be expected to have a material and adverse effect upon the ability of
any Credit Party to fulfill any material obligation under any of the Loan
Documents or the ability of Lender to collect and enforce the payment of the
Obligations as and when due.
 
“Material Agreement” means an agreement to which any Credit Party is a party
(other than the Loan Documents) which either (i) evidences or pertains to (A)
any Funded Debt, (B) capitalized leases, (C) operating leases with aggregate
annual rentals exceeding Five Hundred Thousand Dollars ($500,000), (D) the sale
or purchase of any material portion of goods or services, or any real property,
by or  to an Obligor, or Obligors collectively, or (E) any franchise or license
which is material to the operation of an Obligor’s (or Obligors’) business, (ii)
is with an Affiliate, or (iii)  the breach, termination, cancellation or
nonperformance of which, the failure to renew which,  or the loss of continued
business under which, could reasonably be expected to have a Material Adverse
Effect. Without limitation of the foregoing, the Caspian Contracts and the
Canrig Contract shall at all times constitute Material Agreements.
 
“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Credit Party, any of its Subsidiaries,
or any ERISA Affiliate makes or is obligated to make contributions, or during
the preceding five plan years, has made or been obligated to make contributions
 
“Net Proceeds” means, with respect to the disposition of any property, (a) the
proceeds (including cash receivable (when received) by way of deferred payment)
received by an Obligor (or Obligors collectively) in cash from the sale, lease,
transfer, or other disposition of such property, including insurance proceeds
and awards of compensation received with respect to any Loss affecting all or
part of such property, minus (b) (i) the reasonable and customary costs and
expenses of such sale, lease, transfer, or other disposition (including legal
fees and sales commissions) not to exceed five percent (5%) of the total
purchase price; (ii) amounts applied to repayment of Debt for borrowed money
(other than the Obligations) secured by a Permitted Lien on such property which
is senior to Lender’s Liens; and (iii) in connection with any sale of such
property, a reasonable reserve (not to exceed five percent (5%) of the total
purchase price) for post-closing adjustments to the purchase price (provided
that upon the expiration of ninety (90) days after the sale, any remaining
reserve balance shall constitute Net Proceeds).
 
 
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“Note” shall mean each of the Revolving Note and any other promissory note now
or hereafter evidencing any Obligations, as the same may be amended, restated,
supplemented, or otherwise modified from time to time.
 
“Notice of Borrowing” means each written request for a Revolving Loan
substantially in the form of Exhibit B, attached hereto and made a part hereof.
 
 “Obligations” means all obligations and covenants now or hereafter from time to
time owed to Lender or any Lender Affiliate by Obligors, or any of them, whether
related or unrelated to the Loans, this Agreement, or the Loan Documents,
including, without limitation or duplication, (a) the Loans; (b) the LC
Obligations; (c) all fees, charges, interest, commissions, expenses,
obligations, and liabilities arising from, related to, or on account of any Bank
Products issued to, accepted for or on behalf of, used by, or provided to or on
behalf of Obligors or any of them  or any of its Subsidiaries by Lender or any
Lender Affiliate, including, without limitation, (i) all existing and future
obligations under any Letters of Credit and (ii) all existing and future
obligations under any Hedge Agreements between Obligors or any of them  and
Lender or any Lender Affiliate whenever executed (including, without limitation,
obligations under Hedge Agreements entered into prior to any transfer or sale of
Lender’s or such Lender Affiliate’s interests hereunder if Lender or such Lender
Affiliate ceases to be a party hereto); and (d) all other amounts now owed or
hereafter from time to time owed under the terms of this Agreement and the other
Loan Documents, or arising out of the transactions described herein or therein,
including, without limitation, principal, interest, commissions, fees
(including, without limitation, attorneys’ fees), charges, costs, expenses, and
all amounts due or from time to time becoming due under the indemnification and
reimbursement provisions of this Agreement and the other Loan Documents
(including, without limitation, Section 10.3), together, in each of the
foregoing cases in this definition, with all interest accruing thereon,
including any interest on pre-petition Debt accruing after bankruptcy (whether
or not allowable in such bankruptcy), and whether any of the foregoing amounts
are now due or from time to time hereafter become due, are direct or indirect,
or are certain or contingent, and whether such amounts due are from time to time
reduced or entirely extinguished and thereafter re-incurred.
 
“Obligor” and “Obligors” shall have the meaning ascribed thereto in the preamble
to this Agreement.
 
“OFAC” means the United States Department of the Treasury’s Office of Foreign
Assets Control or any successor thereto.
 
 “PBGC” means the United States Pension Benefit Guaranty Corporation.
 
“Pension Plan” means any employee pension benefit plan (as such term is defined
in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by any Credit Party, any of its
Subsidiaries, or any ERISA Affiliate or to which any Credit Party, any of its
Subsidiaries, or any ERISA Affiliate contributes or has an obligation to
contribute or with respect to which any Credit Party, any of its Subsidiaries,
or any ERISA Affiliate has any liability, or in the case of a multiple employer
or other plan described in Section 4064(a) of ERISA, has made contributions at
any time during the preceding five plan years.
 
 
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“Permitted Debt” has the meaning set forth in Section 7.1 hereof.
 
“Permitted Discretion” means the discretion of Lender, made in Good Faith and in
the exercise of reasonable (from the perspective of an asset-based lender making
loans of similar size and type to similar Obligors) business judgment.
 
“Permitted Liens” has the meaning set forth in Section 7.2 hereof.
 
“Permitted Location” means (a) any location described on Schedule 5.9 hereto (b)
any location as to which Borrower Agent  shall have provided written notice to
Lender and Lender shall have consented in writing to such location’s being a
“Permitted Location.”
 
“Permitted Purposes”, in reference to the use(s) of the proceeds of the Loans,
(i) on the Closing Date, to pay existing Debt being refinanced pursuant hereto,
to the extent approved by Lender, (ii) for Borrowers’ working capital and (iii)
for other purposes in the ordinary course of Borrowers’ respective businesses as
conducted on the Closing Date to the extent not in contravention of any terms or
conditions of this Agreement. In any case,  and without limiting the generality
of the foregoing, no Borrower shall use any proceeds of the Loans for any
purpose in violation of the Trading with the Enemy Act.
 
“Person” means any natural person, corporation, unincorporated organization,
trust, joint-stock company, joint venture, association, company, limited or
general partnership, limited liability company, any government or any agency or
political subdivision of any government, or any other entity or organization.
 
“Plan” means any employee benefit plan (as such term is defined in Section 3(3)
of ERISA) established by any Credit Party, any of its Subsidiaries, or, with
respect to any such plan that is subject to Section 412 of the Code or Title IV
of ERISA, an ERISA Affiliate.
 
 “Prime Rate” means that rate announced by Lender from time to time as its prime
rate and is one of several interest rate bases used by Lender.  Lender lends at
rates both above and below its prime rate, and Obligors acknowledge that
Lender’s prime rate is not represented or intended to be the lowest or most
favorable rate of interest offered by Lender.
 
“Projections” means, for any period and as to such period, for the Consolidated
Companies and if requested by Lender each Obligor and its Subsidiaries
forecasted consolidated and consolidating (a) balance sheets, (b) profit and
loss statements, (c) cash flow statements, and (d) Borrowing Base availability
calculations, all prepared on a month-by-month basis and on a basis consistent
with such Persons’  historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
 
 
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“Properly Contested” means, in the case of any Debt of any Credit Party
(including any taxes) which is not paid when due or payable by reason of such
Credit Party’s bona fide dispute over its liability in regard thereto or the
amount thereof, (a) such Debt is being properly contested in Good Faith by
appropriate proceedings promptly instituted and diligently conducted; (b) such
Credit Party has established appropriate reserves in accordance with GAAP; (c)
the non-payment of such Debt will not have a Material Adverse Effect and will
not result in a forfeiture or sale of any of such Credit Party’s assets; (d) no
Lien is imposed upon any of such Credit Party’s assets with respect to such Debt
unless such Lien is at all times subordinate in priority to the Liens in favor
of Lender (except only with respect to property taxes that have priority as a
matter of applicable law) and enforcement of such Lien is stayed pending the
final resolution or disposition of such dispute; (e) if the Debt results from,
or is determined by the entry, rendition, or issuance against such Credit Party
or any of its assets of a judgment, writ, order, or decree, enforcement of such
judgment, writ, order, or decree is stayed pending a timely appeal or other
judicial review; and (f) if such contest is abandoned, settled, or determined
adversely (in whole or in part) to such Credit Party, such Credit Party
forthwith pays such Debt and all penalties, interest, and other amounts due in
connection therewith.  Only that portion of the Debt which is in dispute may be
Properly Contested.
 
“Regulated Materials” means any hazardous, toxic, or dangerous waste, substance,
or material, the generation, handling, storage, disposal, treatment, or emission
of which is subject to any Environmental Law.
 
“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA.
 
“Reserves” means such amounts as may be required by Lender to be reserved from
the Borrowing Base at any time and from time to time in Lender’s Permitted
Discretion,  including, but not limited to, reserves for dilution (in excess of
5%), subcontractor payables and obligations under Hedge Agreements.
 
“Restricted Payment” means (a) any dividend or other distribution, whether in
cash or in property (other than additional such Equity Interests), direct or
indirect, on account of any Equity Interests issued by  an Obligor or any of its
Subsidiaries, as the case may be, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Equity Interests issued by  an
Obligor or any of its Subsidiaries now or hereafter outstanding by an Obligor or
any of its Subsidiaries, as the case may be, except for any redemption,
retirement, sinking funds or similar payment payable solely in such other shares
or units of the same class of Equity Interests or any class of Equity Interests
which are junior to that class of Equity Interests, or (c) any cash payment made
to redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire any Equity Interests
issued by an Obligor or any of its Subsidiaries now or hereafter outstanding.
 
“Revolving Loan Commitment” means the commitment of Lender, subject to the terms
and conditions herein, to make Revolving Loans to Borrowers and issue Letters of
Credit for the account of Borrowers in accordance with the provisions of Section
2 in an aggregate amount not to exceed Ten Million Dollars ($10,000,000) at any
one time.
 
“Revolving Loan” means a revolving loan made by Lender pursuant to Section
2.1(a).
 
“Revolving Note” has the meaning set forth in Section 2.2(a).
 
 
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“Sanctioned Country” means a country subject to the sanctions programs
identified on the list maintained by OFAC or as otherwise published from time to
time by OFAC.
 
“Sanctioned Person” means (a) any Person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC or as otherwise
published from time to time by OFAC, (b) any Governmental Entity of a Sanctioned
Country, (c) any Person or organization controlled by a Sanctioned Country, or
(d) any Person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.
 
“Security Agreement” means this Agreement as it relates to a security interest
in the Collateral, and any other mortgage instrument, deed of trust, pledge
agreement, life insurance assignment, security agreement, or similar agreement
or instrument now or hereafter executed by any Credit Party or other Person
granting Lender a Lien in any property to secure the Obligations.
 
“Senior Officer” means, as to any Credit Party, the chairman of its board of
directors, its president, its chief executive officer, its chief financial
officer, its treasurer, its chief legal officer or any other officer of such
Credit Party approved by Lender as a “Senior Officer” of such Credit Party.
 
“Solvent” means, as to any Person, that such Person (i) has capital sufficient
to carry on its business and transactions in which it is currently engaged and
all business and transactions in which it is about to engage, (ii) is able to
pay its Debts as they mature, and (iii) has saleable assets having a value
greater than its total liabilities, including all known contingent obligations,
at fair valuation.
 
“Steele Note” means that certain Amended and Restated Promissory Note dated
January 31, 2013 in the principal amount of $2,980,918.51 from Steele Land and
Inspection, LLC made payable to ENGlobal U.S., as it may be modified or amended
from time to time, and together with all extensions thereto, renewals thereof
and substitutions and additions thereto.
 
“Subordinated Debt” means any Debt owing to any third party (including each
other)  by an Obligor, or Obligors collectively,  or a Subsidiary which is made
subordinate in right of payment and, if any Liens on Collateral are otherwise
permitted to exist  pursuant to Section 7.2, in Lien priority,  to the
Obligations and Lender’s Liens on the Collateral, respectively,  pursuant to a
Subordination Agreement.
 
“Subordination Agreement” means an agreement among Lender, Obligors and, as
applicable, a Subsidiary, as debtors,  and the holder of any third party Debt
owing to such Person by Obligors or such Subsidiary  pursuant to which such Debt
is made Subordinated Debt and any Liens on Collateral securing the payment
thereof otherwise permitted to exist pursuant to Section 7.2 are made
subordinate to the Lien of Lender thereon,  in each case, on terms and
conditions satisfactory to Lender in its discretion.
 
“Subsidiary” means, as to any Person, (a) any other Person of which more than
50% of the Equity Interests issued by such other Person are directly or
indirectly owned or effectively controlled by such Person or (b) any other
Person of which such Person is a general partner.  Any unqualified reference to
“Subsidiary” shall be deemed a reference to each Obligor’s or Obligors’
Subsidiaries (if any), unless the context requires otherwise.
 
 
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“Subsidiary Guarantor” and “Subsidiary Guarantors” shall have the meaning
ascribed thereto in the preamble to this Agreement.
 
“Term” means the period from and including the Closing Date to but not including
the Termination Date.
 
 “Termination Date” means the earliest to occur of (a) the third (3rd)
anniversary of the Closing Date; (b) the date on which Borrower Agent requests
that Lender terminate this Agreement and the Commitments pursuant to Section
2.13; and (c) the date on which Lender terminates the Commitments pursuant to
Section 9.2(a) hereof.
 
“Third Party” means (a) any lessor, mortgagee, mechanic or repairman, warehouse
operator, processor, packager, consignee, or other third party which may have
possession of any Collateral or lienholders’ enforcement rights against any
Collateral or (b) any licensor whose rights in or with respect to any
intellectual property or Collateral limit or restrict or may, in Lender’s
determination, limit or restrict an Obligor’s or Lender’s right to sell or
otherwise dispose of such Collateral.
 
“Third Party Agreement” means an agreement in form and substance satisfactory to
Lender pursuant to which a Third Party, as applicable and as required by Lender,
(i) waives or subordinates in favor of Lender any Liens such Third Party may
have in and to any Collateral; (ii) grants Lender access to Collateral which may
be located on such Third Party’s premises or in the custody, care, or possession
of such Third Party for purposes of allowing Lender to inspect, repossess, sell,
or otherwise exercise its rights under the Loan Documents with respect to such
Collateral; (iii) authorizes Lender to complete the manufacture of
work-in-process (if the manufacturing of such Goods requires the use or
exploitation of a Third Party’s intellectual property); (iv) authorizes Lender
to dispose of Collateral bearing or consisting of, in whole or in part, such
Third Party’s intellectual property; or (v) agrees to terms regarding Collateral
held on consignment by such Third Party, in each case containing terms
acceptable to Lender in its Permitted Discretion and as the same may be amended,
restated, supplemented, or otherwise modified from time to time.
 
“Trading with the Enemy Act” means the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
and any enabling legislation or executive order relating thereto.
 
 “UCC” means the Uniform Commercial Code (or any successor statute), as adopted
and in force in the Jurisdiction or, when the laws of any other state govern the
method or manner of the perfection or enforcement of any Lien in any of the
Collateral, the Uniform Commercial Code (or any successor statute) of such other
state.
 
“Unfunded Pension Liability” means, at any time of determination, the sum of (a)
the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of
ERISA, over the current value of that Pension Plan’s assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to
Sections 412 and 430 of the Code and Sections 302 and 303 of ERISA for the
applicable plan year plus (b) for a period of five years following a transaction
which might reasonably be expected to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Credit Party
or any ERISA Affiliate as result of such transaction.
 
 
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“U.S.” means the United States of America.
 
“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001, as the same may be amended, restated, supplemented, or otherwise
modified from time to time.
 
“Working Capital Obligations” means the sum (without duplication) of (a) the
aggregate principal amount of all Revolving Loans and (b) all LC Obligations.
 
1.3 Financial Terms.  All financial terms used herein shall have the meanings
assigned to them under GAAP unless another meaning shall be specified.  When
determining the amount of any Debt for purposes of this Agreement, any election
by an Obligor or any other Credit Party to measure an item of Debt using fair
value (as permitted by Statement of Financial Accounting Standards No. 159 or
any similar accounting standard) shall be disregarded and such determination
shall be made as if such election had not been made.
 
1.4 Rules of Construction.  The terms “herein”, “hereof,” and “hereunder” and
other words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph, or subdivision.  Any pronoun used shall be deemed
to cover all genders.  In the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including” and
the words “to” and “until” each means “to but excluding.”  The section titles,
table of contents, and list of exhibits appear as a matter of convenience only
and shall not affect the interpretation of this Agreement.  All references to
(a) statutes and related regulations shall include all related rules and
implementing regulations and any amendments of same and any successor statutes,
rules, and regulations; (b) any agreement, instrument, or other documents
(including any of the Loan Documents) shall include any and all modifications
and supplements thereto and any and all restatements, extensions, or renewals
thereof to the extent such modifications, supplements, restatements, extensions,
or renewals of any such documents are permitted by the terms thereof; (c) any
Person (including any Obligor or Lender) shall mean and include the successors
and permitted assigns of such Person; (d) “including” and “include” shall be
understood to mean “including, without limitation,” regardless of whether the
“without limitation” is included in some instances and not in others (and, for
purposes of each Loan Document, the parties agree that the rule of ejusdem
generis shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration  of specific matters to matters similar to the
matters specifically mentioned); (e) unless otherwise modified to be “Permitted
Discretion”, the discretion of Lender shall mean the sole and absolute
discretion of Lender exercised in Good Faith; and (f) the word “Obligor” shall
mean each and every Obligor, unless the context otherwise requires.  A Default
or an Event of Default shall be deemed to exist at all times during the period
commencing on the date that such Default or Event of Default occurs to the date
on which such Default or Event of Default is waived in writing by Lender
pursuant to this Agreement or, in the case of a Default, is cured to Lender’s
satisfaction within any period of cure expressly provided in this Agreement.  An
Event of Default shall “continue” or be “continuing” until such Event of Default
has been waived in writing by Lender.  Whenever the phrase “to Obligors’
knowledge” or “to an Obligor’s knowledge”  or words of similar import relating
to the knowledge or the awareness of Obligors or an Obligor are used in this
Agreement or other Loan Documents, such phrase shall mean and refer to (i) the
actual knowledge of the Senior Officer(s) of Obligor(s) or (ii) the knowledge
that the Senior Officer(s) of Obligor(s) would have obtained if he (or she) had
engaged in Good Faith and diligent performance of his (or her)  duties. Whenever
the phrase “paid in full” or words of similar import relating to the Obligations
are used in this Agreement or other Loan Documents, the phrase shall mean the
full and indefeasible payment in full of all Obligations, in cash, the posting
of cash Collateral  in regard to any LC Obligations then outstanding in
accordance with Section 2.9(a), and (c) the release of all claims of Obligors
and the other Credit Parties against Lender arising on or before the payment
date.
 
 
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2. THE CREDIT FACILITY.
 
2.1 The Commitments.
 
(a) Revolving Loan Commitment.  Subject to the terms and conditions of this
Agreement, Lender agrees to make Revolving Loans to Borrowers and issue Letters
of Credit for Borrowers’ account from time to time during the Term.  Lender
shall have no obligation to make any Revolving Loan or issue any Letter of
Credit if doing so would, after giving effect thereto, cause the Working Capital
Obligations to exceed the lesser of (i) the Revolving Loan Commitment or (ii)
the Borrowing Base.  Within the foregoing limit and subject to the terms and
conditions of this Agreement, Borrowers may borrow, repay, and re-borrow the
principal amount of the Revolving Loans at any time during the Term.  Borrowers
shall use the proceeds of the Revolving Loans only for Permitted Purposes.
 
(b) [Intentionally Omitted].
 
2.2 The Notes.
 
(a) Revolving Note.  On the Closing Date, Borrowers shall execute and deliver to
Lender a promissory note in the form of Exhibit A, attached hereto and made a
part hereof (as the same may be amended, restated, supplemented, or otherwise
modified from time to time, the “Revolving Note”), which Revolving Note,
together with Lender’s records, shall evidence the Revolving Loans and interest
accruing thereon.
 
(b) [Intentionally Omitted]
 
2.3 Interest.
 
(a) Types of Loans.  Unless otherwise required by the terms of Section 2.3(g),
all Revolving Loans shall be made as LIR Loans.
 
 
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(b) Agreement to Pay Interest.  Borrowers agree to pay interest on all unpaid
principal amounts of the Loans from the respective date each such Loan is made
until such Loan is paid (whether at stated maturity, upon acceleration, or
otherwise) at the rates of interest and at the times set forth in this
Agreement.
 
(c)  Interest Rate.  All LIR Loans shall bear interest at a rate per annum equal
to the LIBOR Index Rate plus the Applicable Margin.  If any Loan is converted
into a Base Rate Loan because of Section 2.3(g), such Base Rate Loan shall bear
interest at a rate per annum equal to the Base Rate plus the Applicable Margin.
 
(d) 360 Days.  All interest on any Loan and on all other Obligations, together
with any fees chargeable hereunder or under any other Loan Documents  at a per
annum rate,  shall be calculated on the presumed basis of a year of 360 days,
for the actual number of days elapsed, unless such calculation would result in a
usurious rate, in which case interest shall be computed instead on the basis of
a 365/366 day year, as applicable,  for the actual days elapsed.
 
(e) Adjustment of Interest Rate.  The rate of interest on any LIR Loan shall be
adjusted as provided in the definition of “LIBOR Index Rate,” subject to Section
2.3(g).  If any Loan is converted into a Base Rate Loan because of Section
2.3(g), the rate of interest on such Base Rate Loan shall be adjusted
automatically and without notice on and as of the date of any change in the Base
Rate as provided in the definition thereof.
 
(f) Default Rate.  At Lender’s option, during the existence of any Event of
Default, the principal amount of all Obligations outstanding from time to  time
(other than Obligations outstanding from time to  time arising under Hedge
Agreements between Obligors, or any of them, and Lender or any of the Lender
Affiliates) shall bear interest at the Default Rate.  In any event, the Default
Rate shall automatically and without notice to any Person apply from the time
the Obligations have become due and payable under Section 9.2 (whether because
of Lender’s exercising its right to accelerate the Obligations under Section 9.2
or because the Obligations have automatically become due and payable under
Section 9.2) until the Obligations or any judgment thereon are paid in full.
 
(g) Automatic Conversion to Base Rate.  Any provision of this Agreement to the
contrary notwithstanding, if Lender should at any time determine that (i) it is
not reasonably practicable for Lender  to determine LIBOR or the LIBOR Index
Rate, (ii) that LIBOR or the LIBOR Index Rate is no longer available, (iii) it
is no longer lawful for Lender to make Loans at any rate based on LIBOR or the
LIBOR Index Rate, (iv) the LIBOR Index Rate no longer fairly and adequately
compensates Lender for its extensions of the credit contemplated hereby, or (v)
an Event of Default exists and at any time during its continuation Lender shall
so elect, then, in each case, (A) all affected LIR Loans shall automatically and
without notice be converted into Base Rate Loans and (B) all obligations of
Lender to make LIR Loans shall cease until such time as Lender shall have
determined that it is able to determine the LIBOR Index Rate or such illegality
or other condition described above shall have been  reversed, or such Event of
Default shall have been waived,  as applicable.
 
(h) [Intentionally Omitted].
 
 
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2.4 Requesting New Loans.
 
(a) Revolving Loans.  Revolving Loans shall be deemed requested pursuant to the
following clauses (i) and (ii) or when requested pursuant to the following
clause (iii).
 
(i) Subject to Subsection 2.4(b), the becoming due of any Obligation (whether as
principal, accrued interest, fees, or other charges owed to Lender or any Lender
Affiliate) shall in all respects constitute Borrowers’ irrevocable request for a
Revolving Loan in an amount equal to such Obligations, and Lender may make such
Revolving Loan and apply the proceeds thereof to the payment of such
Obligations.
 
(ii) Subject to Subsection 2.4(b), the presentment for payment of any instrument
drawn on, or request for any wire or other transfer from, a Funding Account at a
time when there are insufficient funds in such account to cover such instrument
shall in all respects constitute Borrowers’ irrevocable request for a Revolving
Loan in an amount equal to the amount payable on such instrument to be made by
Lender, and Lender may make such Revolving Loan and apply the proceeds thereof
to such Funding Account for payment of such instrument or transfer.
 
(iii) For all other Revolving Loans, Borrower Agent shall provide Lender a
written request for borrowing pursuant to a Notice of Borrowing in accordance
with Section 2.5.
 
(b) Provisions Regarding Deemed Requests for Revolving Loans.  Lender shall have
no obligation to honor any deemed request for a Revolving Loan under Sections
2.4(a)(i) or (ii), if (i) such request is deemed made after the Termination
Date, (ii) doing so would cause the Working Capital Obligations to exceed the
lesser of the Revolving Loan Commitment and the Borrowing Base, or (iii) Lender
determines that any condition precedent in Section 4.2 hereof or any other
condition precedent to the making of such Loan is not then satisfied or will not
be satisfied when such Loan is to be made; provided, Lender may make such
Revolving Loan in its discretion and without regard to the existence of, and
without being deemed to have waived, any Default or Event of Default which may
then exist or arise from the making of such Revolving Loan and without regard to
the absence of satisfaction of any condition precedent.   Lender may make
Revolving Loans under Sections 2.4(a)(i) and (ii) without Borrower Agent’s
having submitted a Notice of Borrowing in regard thereto.   Subject to Section
2.3(g), all Revolving Loans made pursuant to clauses (i) and (ii)  of Section
2.4(a) shall be made as LIR Loans.
 
2.5 Requests for Borrowings; Conversions.
 
(a) Making Requests for New Loans; Conversions.  Each request for the making of
a new Revolving Loan shall be in writing, and Borrower Agent  shall submit a
Notice of Borrowing in respect thereof.  Each such request shall specify (i) the
date for the making of the applicable Loan, which date must be a Business Day;
(ii) the principal amount of the applicable Loan to be made; (iii) for any new
Loan, instructions for the disbursement of the proceeds of such Loan for
Permitted Purposes (provided that, if such instructions for the disbursement of
the proceeds will be deposited into a Funding Account); (iv) for any new
Revolving Loan, if requested by Lender, a written calculation of the Borrowing
Base and a reconciliation of such Borrowing Base to the previous Borrowing Base
or request for a Revolving Loan; and (v) such other information Lender may
require from time to time.
 
 
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(b) Timing and Acceptance of Requests.  Requests made under this Section 2.5 are
irrevocable.  Requests under this Section 2.5 which Lender receives after 11:00
a.m. (Birmingham, Alabama, time) shall be deemed received on the next Business
Day.  Lender’s acceptance of a request for the making of a new Loan under this
Section 2.5 shall be indicated by its making the Loan requested.  Lender shall
make such Revolving Loans in immediately available funds on the same Business
Day it receives or is deemed to have received a request for such borrowing in
accordance herewith.
 
2.6 Excess Outstandings.  Any provision of this Agreement to the contrary
notwithstanding, Lender may, in its discretion, make or permit to remain
outstanding Revolving Loans which are causing or would cause the Working Capital
Obligations to exceed the Revolving Loan Commitment or the Borrowing Base, and
all such excess amounts shall (i) be part of the Obligations evidenced by the
Revolving Note, (ii) bear interest as provided herein, (iii) be payable on
demand, (iv) be secured by the Collateral, and (v) be entitled to all rights and
security as provided under the Loan Documents.
 
2.7 Repayment of Loans.
 
(a) Repayment of Obligations Generally.  Borrowers shall pay all outstanding
principal amounts and accrued interest under the Note in accordance with the
terms of the  Note and this Agreement.
 
(b) Repayment of Revolving Loans.
 
(i) Borrowers shall immediately repay the principal amount of the Revolving
Loans with the proceeds of any Collateral of the type included in the Borrowing
Base; provided, however, that, to the extent Lender receives and applies such
proceeds in the manner described below  Borrowers’ payment obligation under this
Section 2.7(b)(i) shall be satisfied with respect to such proceeds.  All
payments made pursuant to this subsection shall be applied to the Revolving
Loans in such order and manner as Lender in its discretion shall
determine.   All outstanding principal of the Revolving Loans shall be due and
payable on the Termination Date.
 
(ii) Interest accrued on the Revolving Loans shall be due and payable, (A) in
arrears, on the first day of each calendar month for the immediately preceding
calendar month or portion thereof, computed through the last calendar day of the
preceding month, commencing on the first day of the first calendar month
following the Closing Date;  (B) on the Termination Date;  and (C) on demand
after the Termination Date.
 
 
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(c) [Intentionally Omitted].
 
(d) Optional Prepayments of Revolving Loans.  From time to time, Borrowers  may
prepay the principal amount of the Revolving Loans, in whole or in part, without
premium or penalty.
 
(e) Mandatory Prepayments of Revolving Loans; Sale of Collateral.  Borrowers
shall prepay the principal balance of the Revolving Loans immediately upon
receipt of, and in an amount equal to, the Net Proceeds received with respect to
the sale or other disposition of any real property or Equipment except to the
extent otherwise permitted under Section 6.3(b).  Nothing in this subsection
constitutes Lender’s consent to any disposition of any Equipment or real
property.
 
(f) [Intentionally Omitted].
 
(g) Payment of Other Obligations.  Borrowers  shall pay Lender the balance of
the Obligations under the Loan Documents requiring the payment of money on the
terms set forth in the Loan Documents, or, if no date of payment is otherwise
specified in the Loan Documents, on demand.
 
(h) Authorization to Debit.  In addition to Lender’s right to make a deemed
Revolving Loan under Section 2.4(a), Lender may, without notice to, or the
consent of, Borrowers, debit any Funding Account, Collections Account, other
Deposit Account, or other account over which Lender has Control and apply such
amounts to the payment of Obligations which are then due and payable.
 
(i) Time and Location of Payment.  Except for payments made pursuant to Section
2.8 and Section 2.4(a)(i), Borrowers shall make each payment of principal of and
interest and other Obligations which are due and payable not later than 12:00
noon (Birmingham, Alabama, time) on the date due, without set-off, counterclaim,
or other deduction, in immediately available funds to Lender at its address
referred to in Section 10.4.  If any payment of any Obligations shall be due on
a day which is not a Business Day, such payment shall be due and payable the
next Business Day, and interest shall accrue during such time.
 
(j) Excess Over Borrowing Base.  At any time the Working Capital Obligations
exceed the Borrowing Base, Borrowers  shall immediately pay the amount of such
excess to Lender.
 
(k) Hedge Agreements Are Independent.  Prepayment of any Loans shall not affect
Borrowers’ obligation to continue making payments under any Hedge Agreement
between Borrowers, or any of them,  and Lender or any Lender Affiliate, or any
of them, which shall remain in full force and effect notwithstanding such
prepayment, subject to the terms of such Hedge Agreement.
 
 
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(l) Capital Requirements; Increased Costs.  If (i) the introduction of, or any
change in, or in the interpretation of, any applicable law or (ii) compliance
with any guideline or request from any central bank or comparable agency or
other Governmental Entity (whether or not having the force of law), has or would
have the effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by
Lender or any Person controlling Lender as a consequence of, or with reference
to, the Revolving Loan Commitment or any other Commitments of this type, below
the rate which Lender or such other Person could have achieved but for such
introduction, change, or compliance, then within five (5) Business Days after
Lender’s written demand for payment, Borrowers shall pay Lender from time to
time as specified by Lender additional amounts sufficient to compensate Lender
or such other Person for such reduction.  Lender’s accounting of such amounts
submitted in writing to Borrower Agent shall be presumed conclusive absent
manifest error.  If there is any change in the LIBOR Reserve Requirements, then
Borrowers  shall, from time to time upon demand by Lender, pay to Lender such
additional amounts as Lender may deem necessary to compensate Lender for any
increased costs resulting from such change.  Borrowers agree that Lender’s
determination of such additional amounts and increased costs will be made in
Lender’s discretion and shall be conclusive absent manifest error.  Without
limitation of the foregoing, the Dodd-Frank Wall Street Reform and Consumer
Protection Act, and all requests, rules, guidelines and directives thereunder
shall be deemed to be a change in applicable law for purposes hereof, regardless
of the date enacted, adopted or issued.
 
2.8 Lockboxes; Collections Accounts.
 
(a) Establishment of Lockboxes; Deposits of Cash  On the Closing Date or as soon
as practicable thereafter, but in any event within thirty (30) days thereafter,
Obligors shall (i) establish and thereafter maintain one or more lockboxes,
blocked accounts and similar vehicles for the depositing of cash proceeds from
Collateral to be placed under Lender’s control, and contemporaneously therewith,
direct all of its Account Debtors to make payments to such lockboxes (or, if
made by wire or other transfer, to a Collections Account) and (ii) cause all
cash on hand, other then any permitted to exist pursuant to Section 7.15(d),  to
become Approved Cash Investments.
 
(b) Collections Accounts.  To the extent not delivered directly to a lockbox,
all Items or funds received by an Obligor in respect of Accounts or as Net
Proceeds of other Collateral shall be held by such Obligor in trust for Lender,
shall not be commingled with such Obligor’s funds, and shall be deposited
promptly by such Obligor after its receipt thereof into a Collections Account or
promptly forwarded to Lender in the form received (with any necessary
endorsement).   All such Items and funds shall become the exclusive property of
Lender upon the earlier of the receipt thereof by Lender or by such Obligor, for
application to the payment of the Obligations as provided below. Lender shall
promptly process all Items received into each lockbox and deposit such Items
into a Collections Account.  Subject to Section 2.8(c), Lender shall apply
available balances from any Item or funds deposited into a Collections Account
to the payment of Obligations in such order and manner as Lender, in its
discretion, shall determine, until all such Obligations have been fully paid and
satisfied after which Lender shall apply any balance remaining (subject to
applicable law directing otherwise) into  Approved Cash Investments to which
Borrowers shall have access and withdrawal rights unless and until an Event of
Default has occurred which is then continuing, in which case Lender alone shall
control all such balances.
 
 
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(c) Chargebacks.  No payment item received by Lender shall constitute payment to
Lender until such item is actually collected by Lender and credited to the
Collections Account; provided, however, that Lender shall have the right to
charge back to the Collections Account (or any other deposit account of
Obligors, or any of them,  maintained with Lender) an Item which is returned for
inability to collect, plus accrued interest during the period of Lender’s
provisional credit for such item prior to receiving notice of dishonor.
 
(d) Power of Attorney; Security Interest; Applicable Fees.  Each Obligor hereby
irrevocably appoints Lender (and any Person designated by Lender) as such
Obligor’s attorney-in-fact to indorse such Obligor’s name on any Items which
come into Lender’s possession or control, this power being coupled with an
interest and being irrevocable so long as any of the Obligations remain
outstanding.  Such endorsement by Lender under such power of attorney shall, for
all purposes, be deemed to have been made by Obligor (prior to any subsequent
endorsement by Lender) in negotiation of the Item.  In addition to the security
interest granted Lender in Section 3, each Obligor hereby grants Lender a
security interest in and to all Items, funds, and balances held in any lockbox,
any Funding Account, and any Collections Account, in each case as Collateral for
the Obligations.  Obligors  shall pay all of Lender’s standard fees and charges
in connection with any lockboxes, Funding Accounts, and Collections Accounts and
the processing of Items and other transactions relating thereto, as such fees
and charges may change from time to time.
 
2.9 Letters of Credit.
 
(a) Issuance of Letters of Credit.  Subject to the terms and conditions of this
Agreement, Lender shall from time to time issue, extend, or renew Letters of
Credit for the account of Borrowers; provided that (i) Borrower Agent shall have
given Lender not less than five (5) Business Days’ written notice thereof; (ii)
Lender shall have no obligation to issue any Letter of Credit, if (A) doing so
would cause (1) the Working Capital Obligations to exceed the lesser of the
Borrowing Base and the Revolving Loan Commitment or (2) the LC Obligations to
exceed the LC Sublimit; or (B) the expiration date of such requested Letter of
Credit would occur after the date specified in clause (a) of the definition of
Termination Date; and (iii) all other conditions precedent to the issuance of
each such Letter or Credit set forth in this Agreement shall have been satisfied
or waived in writing by Lender.  All payments made by Lender under any Letter of
Credit (whether or not a Borrower is the account party) and all fees,
commissions, discounts, and other amounts owed or to be owed to Lender in
connection therewith, shall be paid on demand, unless (x) Borrower Agent
instructs Lender to make a Revolving Loan to pay such amount, (y) Lender agrees
to do so, and (z) sufficient Excess Availability exists to make such Revolving
Loan.  All LC Obligations shall be secured by the Collateral.  Borrower Agent
or, if requested by Lender, Borrowers, shall complete and sign such applications
and supplemental agreements and provide such other documentation as Lender may
require in respect to the issuance and administration of the Letters of
Credit.  The form and substance of all Letters of Credit shall be subject to
Lender’s approval.  Lender may charge certain fees or commissions for the
issuance, handling, renewal or extension of a Letter of Credit, in addition to
the fees payable pursuant to Section 2.11.  Borrowers unconditionally guarantee
the payment and performance of all obligations of any Subsidiary with respect to
Letters of Credit issued for the account of such Subsidiary.  Upon Lender’s
request during the existence of an Event of Default, Obligors shall immediately
deliver to Lender immediately available funds in an amount equal to one hundred
five percent (105%) of the LC Obligations, which Lender shall hold as cash
Collateral for the payment of Obligations related to the Letters of Credit.
 
 
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(b) Law Governing Letter of Credit.  Each Letter of Credit issued hereunder
shall be governed, as applicable, by (i) the Uniform Customs and Practice for
Documentary Credits International Chamber of Commerce (“ICC”), Publication 600,
or any subsequent revision or restatement thereof adopted by the ICC and in use
by Lender or (ii) the International Standby Practices, ICC Publication No. 590,
or any subsequent revision or restatement thereof adopted by the ICC and in use
by Lender, except to the extent that the terms of such publication would limit
or diminish rights granted to Lender hereunder or in any other Loan Document, in
which case the rights of Lender granted hereunder or in any other Loan Document
shall govern and control.
 
2.10 Fees.
 
(a) Closing Fee.  On the Closing Date, Borrowers shall pay Lender a
non-refundable, fully earned closing fee in the amount of Seventy-Five Thousand
Dollars ($75,000).
 
(b) Unused Line Fee.  Borrowers shall pay Lender a fee for each day of the Term
equal to (A) the Applicable Unused Line Fee Percentage (as defined
below),  divided by (B) 360 (or, if applicable, pursuant Section 2.3(d),
365/366), times (C) the amount by which the Revolving Loan Commitment exceeded
the Working Capital Obligations on such day.  Borrowers shall pay this fee on
the first day of each calendar month, commencing on the first of such days
following the Closing Date, for each day in the preceding calendar month (or
portion thereof), and on the Termination Date.  As used herein, the “Applicable
Unused Line Fee Percentage” means (i) one-half of one percent (.50%) per annum,
if the Working Capital Obligations for the relevant period are less than fifty
percent (50%) of the Revolving Commitment and (ii) one-fourth of one percent
(1/4%) per annum, if the Working Capital Obligations for the relevant period
equal or exceed fifty percent (50%) of the Revolving Commitment.
 
(c) Letter of Credit Fees.  Borrowers shall pay to Lender, at such times as
Lender shall require, Lender’s standard fees, commissions, and charges in
connection with Letters of Credit (including, without limitation, with respect
to the initial issuance thereof and any amendments, extensions, or modifications
with respect thereto), as in effect from time to time, and with respect to
standby and commercial Letters of Credit, at the time of issuance of each Letter
of Credit, a fee equal to the then effective Applicable Margin for Revolving
Loans made as LIR Loans on the face amount of the Letter of Credit for the
period of time the Letter of Credit will be outstanding.  Borrowers agree that,
in all instances in which Lender has invoked the Default Rate in accordance with
Section 2.3(g), Borrowers shall pay Lender an additional issuance fee for each
Letter of Credit for the period of time during which the Default Rate is in
effect at the additional rate described for Letters of Credit in the definition
of “Default Rate” and such additional issuance fee shall be payable on demand.
 
 
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(d) Collateral Management Fees. Borrowers shall pay to Lender a collateral
management fee equal to One Thousand Five Hundred Dollars ($1,500) per
month,  which shall be due and payable on the Closing Date and on the first day
of each succeeding calendar month following the Closing Date until the end of
the Term.
 
(e) Field Examinations.  Borrowers shall pay for all field examinations to the
extent required by Section 6.5.
 
(f) Appraisals.  [Intentionally Omitted];
 
(g) Fees Fully Earned.  Unless otherwise expressly stated herein, all fees
payable to Lender pursuant to this Agreement or the other Loan Documents shall
be deemed fully earned when they become due and payable and, once paid, shall be
deemed non-refundable, in whole or in part; and, to the extent of applicable
law,  all such fees shall be deemed compensation to Lender for services rendered
and not interest or any other charge for the use, forbearance to collect or
detention of money.
 
2.11 Statement of Account.  If Lender provides Borrower Agent with a statement
of account in respect of any sums owing hereunder or under any other Loan
Documents, on a periodic basis, each such statement shall be final, conclusive
and binding on Borrowers for all purposes (absent manifest error), unless,
within forty-five (45) days of its receipt of such statement,  Borrower Agent
objects to Lender  in writing and with specificity to such statement.
 
2.12 Termination.  Borrowers may terminate this Agreement and the
Commitments  before the Termination Date, in whole but not in part, by Borrower
Agent giving Lender thirty (30) days prior written notice; provided, however,
that no termination by Borrowers shall be effective until (a) Lender shall have
received cash collateral equal to 105% of all Obligations which remain
contingent (e.g., LC Obligations and then outstanding indemnification payments)
or an irrevocable direct-pay letter of credit naming Lender as beneficiary,
which letter of credit shall be in form and substance satisfactory to Lender, be
issued by a bank domiciled in the United States which would qualify as an
“Eligible Assignee” if made “Lender” hereunder and otherwise satisfactory to
Lender, in its Permitted Discretion, and be in an original face amount equal to
105% of all such Obligations  and (b) all other Obligations have been fully and
finally paid and performed.  Any notice of termination shall be
irrevocable.  Lender may terminate this Agreement and the Commitments at any
time, without notice, during the existence of an Event of Default.
 
2.13 USA Patriot Act Notice.  To help fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each Person who opens an
account.  For purposes of this section, account shall be understood to include
loan accounts.
 
 
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3. SECURITY AGREEMENT.
 
3.1 Security Interest.
 
(a) Grant. As security for the full and final payment and performance of the
Obligations, each Obligor hereby grants to Lender (as agent for the benefit of
itself and any of the Lender Affiliates to which at any time such Obligor or any
Subsidiary may owe any Obligations) a continuing security interest in and to all
right, title, and interest of such Obligor in and to the Collateral, whether now
owned or hereafter acquired by such Obligor, howsoever arising and wherever
located.
 
(b) Care. Except as expressly required by the Security Agreements or applicable
law, Lender shall have no obligation to (i) exercise any degree of care in
connection with any Collateral in its possession or (ii) take any steps
necessary to preserve any rights in the Collateral or to preserve any rights in
the Collateral against senior or prior parties (which steps each Obligor agrees
to take).  In any case, Lender shall be deemed to have exercised reasonable care
of the Collateral if Lender takes such steps for the care and preservation of
the Collateral or rights therein as Lender takes for its own,  similar property;
provided that Lender’s omission to take any action requested by an Obligor or
Borrower Agent in regard to the foregoing shall not be deemed a failure to
exercise reasonable care.  Lender’s segregation or specific allocation of
specified items of Collateral against any of the Obligations after an Event of
Default has occurred and while it is continuing shall not waive or affect any
Lien against other items of Collateral or any of Lender’s options, powers, or
rights under this Agreement or otherwise arising.
 
(c) Actions. Lender may at any time and from time to time from and after the
occurrence of any Event of Default, and during its continuation, with or without
notice to Obligors, (i) transfer any of the Collateral into the name of Lender
or the name of Lender’s nominee in connection with any sale of Collateral made
pursuant to and in accordance with Section 9.2(c) of this Agreement and the
applicable provisions of the UCC, and subject at all times thereto, (ii) notify
any Account Debtor or other obligor with respect to any of the Collateral to
make payment of any amounts due or to become due thereon directly to Lender, and
(iii) receive and direct the disposition of any proceeds of any Collateral.  All
proceeds of Collateral so derived from the foregoing actions shall be applied to
the Obligations in whatever order Lender shall determine.
 
(d) Sanctioned Person. Any term or provision of this Agreement or the other Loan
Documents to the contrary notwithstanding, (i) no Account, Instrument, Chattel
Paper, or other obligation or property of any kind due from, owed by, or
belonging to, a Sanctioned Person or (ii) any lease under which the lessee is a
Sanctioned Person shall be Collateral or shall be credited toward the payment of
the Obligations.
 
 
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(e) Stock in Foreign Subsidiary. Unless otherwise expressly provided in a
separate Security Document, the Collateral shall not include more than sixty-six
and two-thirds percent (66-2/3%) of any voting Equity Interests (as contemplated
in Treas. Reg. Section 1.956-2(c)(2)) issued to an Obligor by any “controlled
foreign corporation” (as such term is defined in Section 957 of the Code).
 
3.2 Financing Statements; Fixture Filings; Power of Attorney.  Each Obligor
authorizes Lender, in its discretion,  to file any financing statements (and
other similar filings or public records or notices relating to the perfection of
Liens), fixture filings and amendments thereto relating to the Collateral which
at any time or from time to time Lender in its discretion deems appropriate, in
form and substance required by Lender, and to (a) describe the Collateral
thereon (i) as “all personal property of the debtor,” “all assets,” or words of
similar effect, if appropriate and permitted by applicable law, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the UCC or any other applicable law, or (ii) by specific
collateral category and (b) include therein all other information which is
required by Article 9 of the UCC or other applicable law with respect to the
preparation or filing of a financing statement (or other similar filings or
public records or notices relating to the perfection of Liens), fixture filing,
or amendment.  Each Obligor appoints Lender as its attorney-in-fact to perform
all acts which Lender deems appropriate to perfect and to continue perfection of
the Lien granted to Lender under any Security Agreement, including, without
limitation, (x) the filing of financing statements (and other similar filings or
public records or notices relating to the perfection of Liens), fixture filings,
and amendments, (y) the execution in such Obligor’s name of any agreements
providing for Control over any applicable Collateral, and (z) the endorsement,
presentation, and collection on behalf of such Obligor and in such Obligor’s
name of any Items or other documents necessary or desirable to collect any
amounts which such Obligor may be owed, such power of attorney being coupled
with an interest and is therefore irrevocable.  Effective upon the occurrence of
an Event of Default and continuing at all times during its continuance, each
Obligor grants Lender a non-exclusive license and right to use, without royalty
or other charge, such Obligor’s intellectual and other property (including,
without limitation, any licensed intellectual property, unless prohibited by the
enforceable terms of such license) for purposes of advertising any Collateral
for sale, collecting any Accounts, disposing of or liquidating any Collateral,
settling claims, or otherwise exercising any of its rights and remedies under
the Loan Documents (including, without limitation, labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, product line names,
advertising materials, and any other property of a similar nature).  Each
Obligor’s rights under all licenses and all franchise agreements shall inure to
Lender’s benefit effective upon the occurrence of an Event of Default and
continuing at all times during its continuance in connection with the exercise
by Lender of its rights and remedies hereunder. Each Obligor shall be liable for
any and all expense incurred in connection with Lender’s exercising its rights
under this Section 3.2.
 
3.3 Entry.  Each Obligor (for itself and on behalf of its Subsidiaries)
irrevocably consents to any act by Lender or its agents in accordance with the
terms of this Agreement or any other Loan Document in entering upon any premises
for the purposes of either (a) inspecting any Collateral subject to and in
accordance with Section 6.5, or (b) effective upon the occurrence of an Event of
Default and continuing at all times during its continuance in connection with
the exercise by Lender of its rights and remedies hereunder,  taking possession
of or repossessing any Collateral. Each Obligor waives, as to Lender and its
agents, any now existing or hereafter arising claim based upon trespass or any
similar cause of action for entering upon any premises where Collateral may be
located.
 
 
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3.4 Other Rights.  Without limiting any Credit Party’s obligations under the
Loan Documents, each Obligor authorizes Lender from time to time (a) to (i) take
from any party and hold additional Collateral or Guaranty for the payment of the
Obligations or any part thereof, (ii) exchange, enforce, or release such
Collateral or Guaranty or any part thereof, and (iii) release or substitute any
endorser or Guarantor or any party who has granted Lender any security interest
in any property as security for the payment of the Obligations or any part
thereof or any party in any way obligated to pay the Obligations or any part
thereof, and (b) during the existence of any Event of Default, to direct the
manner of the disposition of the Collateral and the enforcement of any
endorsements, guaranties, letters of credit, or other security or Supporting
Obligations relating to the Obligations or any part thereof as Lender in its
discretion may determine.
 
3.5 Accounts.  Lender may, in its Permitted Discretion, contact any Account
Debtor (a) to ensure such Account Debtor is directing payments on each Obligor’s
Accounts to a lockbox or a Collections Account (as applicable), (b) to notify
such Account Debtor of the existence of Lender’s Liens under the Security
Agreements, provided that such contact  is preceded by reasonable advance notice
from Lender to Borrower Agent (barring exigent circumstances) unless a Default
or an Event of Default then exists.
 
3.6 [Intentionally Omitted] .
 
3.7 Waiver of Marshaling.  Each Obligor hereby waives any right it may have to
require marshaling of its or any other Obligor’s assets.
 
3.8 Control; Further Assurances.  Each Obligor will, at its expense, cooperate
with Lender in (a) obtaining Control of, or Control agreements with respect to,
Collateral for which Control or a Control agreement is required for perfection
of Lender’s security interest under the UCC and (b) perfecting Lender’s Lien in
the Collateral by any one or more methods of perfection requested by Lender. In
addition to the foregoing, all Deposit Accounts maintained with Lender shall be
deemed at all times to be under Lender’s Control; provided,  that, without
limiting the generality of the foregoing, each Obligor shall promptly, upon
Lender’s request, execute and deliver to Lender a Control Agreement in favor of
Lender, in its capacities as secured party and depository institution, reading
such Deposit Accounts.
 
4. CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT.
 
4.1 Conditions Precedent to Initial Loans.  In addition to any other requirement
set forth in this Agreement, Lender shall not be required to fund any Loan or
make any other extensions of credit hereunder unless and until the following
conditions shall have been satisfied, in the sole opinion of Lender and its
counsel:
 
(a) Execution and Delivery of Documents.  Each Credit Party and each other party
to any Loan Document, as applicable, shall have executed and delivered each of
the following documents, each of which shall be in form and substance
satisfactory to Lender:
 
 
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(i) This Agreement;
 
(ii) Each Note;
 
(iii) Each Guaranty required by Lender as of the Closing Date from each
Subsidiary Guarantor;
 
(iv) All deposit account control agreements, securities account control
agreements, required by Lender;
 
(v) A pledge agreement by and between each Obligor owning Equity Interests in
any other Obligor or Obligors and Lender with respect to the pledge of such
Equity Interests to Lender as security for the Obligations; .
 
(vi) A remittance direction letter signed by Borrower Agent addressed to PNC
National Bank and co-signed by PNC National Bank or other, similar documentation
having substantially the same effect and otherwise satisfactory to Lender, in
its Permitted Discretion;
 
(vii) [Intentionally Omitted];
 
(viii) [Intentionally Omitted];
 
(ix) A Collateral Disclosure Certificate duly completed by each Obligor and each
other credit Party requested to do so by Lender;
 
(x) The initial Notice of Borrowing, duly  completed by Borrower Agent,
detailing the uses of the proceeds of the initial disbursements of the Loans
(which shall all be for Permitted Purposes only);
 
(xi) [Intentionally Omitted];
 
(xii) [Intentionally Omitted];
 
(xiii) [Intentionally Omitted;]
 
(xiv) A complete and final payoff letter from PNC National Bank and any other
creditor to which any Obligor has Debt which is to be paid in full with the
proceeds of the initial Loans;
 
(xv) A closing certificate from a Senior Officer of Borrower Agent certifying as
Obligors’ Solvency,  their compliance with those the conditions precedent set
forth in  clause (xii) of subsection (b)  of this Section 4.1  and as to such
other matters concerning Obligors relevant hereto as Lender in its Permitted
Discretion may request;
 
 
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(xvi) A secretary’s certificate (or substantively similar document acceptable to
Lender) for each Credit Party that is an entity which shall include, either
directly or by incorporated attachments, (A) certifications as to the incumbency
of each of such Credit Party’s officers, together with specimen signatures of
those of those officers who will have the authority to execute documents on
behalf of such Credit Party; (B) true and complete copies of (1) such Credit
Party’s articles or certificate of incorporation, organization, or formation;
(2) such Credit Party’s bylaws, operating agreement, partnership agreement or
other constitutional documents; and (3) resolutions of the appropriate governing
body or board authorizing the transaction contemplated herein; and (C)
certifications as to such other matters as Lender may require;
 
(xvii) The legal opinion of each Credit Party’s legal counsel addressed to
Lender regarding such matters relevant hereto as Lender and its counsel may
reasonably request;
 
(xviii) An initial  Borrowing Base Certificate duly completed by Borrower Agent,
together with all supporting statements, schedules, and reconciliations as may
be required by Lender, in its Permitted Discretion, consistent with Section
6.6(a)  in connection therewith; and
 
(xix) Any and all additional opinions, documents, certificates, and other
assurances that Lender or its counsel may require in connection therwith, in its
Permitted Discretion.
 
(b) Supporting Documents and Other Conditions.  Obligors shall cause to be
delivered to Lender the following documents (each of which must be in form and
substance satisfactory to Lender in its discretion) and shall satisfy the
following conditions:
 
(i) Good standing certificates (or certificates of similar import and substance)
for each Credit Party that is an entity from the state or other jurisdiction in
which such Credit Party was incorporated, organized, or formed and from each
state or other jurisdiction in which such Credit Party is authorized to do
business, each of which shall be certified by the appropriate official of each
such jurisdiction;
 
(ii) UCC searches and other Lien searches showing no existing security interests
in or Liens on the Collateral (other than Permitted Liens);
 
(iii) Certificates of, evidence of, copies of all policies of, and other
documents regarding the insurance required by Section 6.3, together with
endorsements thereto favoring Lender  as required by Section 6.3;
 
(iv) UCC financing statements (and other similar filings or public records or
notices relating to the perfection of Liens) and, if applicable, certificates of
title covering the Collateral shall duly have been recorded or filed in the
manner and places required by law to establish, preserve, protect, and perfect
the interests and rights created or intended to be created by the Security
Agreements, and all taxes, fees, and other charges in connection with the
execution, delivery, and filing of the Security Agreements and the financing
statements (and any other similar filings or public records or notices relating
to the perfection of Liens) shall have been paid;
 
 
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(v) Lender shall have received Obligors’ historical consolidated financial
statements (including balance sheets, income statements and statements of cash
flow),  internally prepared, for Obligors’ most recently ended Fiscal Month
ending not later thirty (30) days prior to the Closing Date and for the Fiscal
Year to date, together with projections internally prepared of such financial
statements on a month-to-month basis for the period from July 1, 2014 until the
end of Obligors’ 2014 Fiscal Year end, and such other financial data relevant to
Obligors as Lender in its Permitted Discretion may request;
 
(vi) All Collateral and field exams required by Lender shall have been
completed;
 
(vii) Lender shall be satisfied in all respects with each Obligor’s and its
Subsidiaries’ capital structure (both before and after giving effect to the
transactions contemplated in this Agreement and the other Loan Documents) and
the terms of each Obligor’s and its Subsidiaries’ debt and equity;
 
(viii) All fees due Lender from Obligors shall have been paid, and all costs
incurred by Lender to be reimbursed by Obligors pursuant hereto shall have been
reimbursed,  and Lender shall have received satisfactory evidence of payment to
other parties of all fees or costs which any Credit Party is required under the
Loan Documents to pay by the date of the initial Loan or Letter of Credit;
 
(ix) There shall be no litigation in which any Credit Party or Subsidiary is a
party defendant, which Lender determines, in its Permitted Discretion,  could
reasonably be expected to have a Material Adverse Effect;
 
(x) Lender shall have received each Obligor’s and its Subsidiaries,’ the
Consolidated Companies’ and any Guarantor’s financial statements for its and
their respective most recently completed Fiscal Year ending and most recently
completed Fiscal Quarter and Fiscal Month together with such other financial
reports and information concerning such Persons as Lender shall request;
 
(xi) Lender shall have received Projections for the remainder of the one (1)
year period ending on December 31, 2014,  prepared on a month-to-month basis;
 
(xii) Lender shall have determined that, (A) after giving effect to, the Loans
to be made on the Closing Date, the issuance of any Letters of Credit to be
issued on the Closing Date, and the payment of all fees and reimbursement of all
closing costs incurred on or prior to the Closing Date, Excess Availability
shall not be less than an amount equal to not less than the sum of Two Million
Five Hundred Thousand Dollars ($2,500,000) plus the aggregate amount of all of
Obligors’ accounts payable which are more than thirty (30) days past due;  (B)
Obligor’s Fixed Charge Coverage Ratio, determined in accordance with Section
8.1,  for the twelve (12) Fiscal Months of Obligors ending with the last Fiscal
Month  not more than thirty (30) days prior to the Closing Date for which
financial statements have been delivered to Lender by Obligors giving effect to
the transactions contemplated hereby, as set forth hereinabove,  as if occurring
within such period, is not less than 1.10:1.00.
 
 
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4.2 Conditions Precedent to Each Loan and Letter of Credit.  In addition to any
other requirements set forth in this Agreement, Lender shall not be required to
fund any Loan or issue any Letter of Credit (including those made or issued on
the Closing Date) unless and until each of the following conditions shall have
been satisfied, in Lender’s sole opinion, exercised in Good Faith, and each
request for a Loan or the issuance of a Letter of Credit shall be deemed to be a
representation that all such conditions have been satisfied:
 
(a) Notice of Borrowing; Letter of Credit Request.  If required by this
Agreement or by Lender, Borrower Agent shall have delivered to Lender a Notice
of Borrowing (for the making of Loans) or a request for the issuance of a Letter
of Credit (in accordance with Section 2.10), together with, in each case, such
other information Lender may request;
 
(b) No Default.  No Default or Event of Default shall have occurred and be
continuing or would result from the making or issuance of the requested Loan or
Letter of Credit;
 
(c) Correctness of Representations.  All representations and warranties made to
Lender by any Credit Party in any Loan Document or otherwise in writing shall be
true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of date of the requested
Loan or Letter of Credit;
 
(d) No Material Adverse Effect.  There shall have been no change which could
have a Material Adverse Effect on Obligors, or any of them, any Credit Party or
any Subsidiary of Obligors since the date of the most recent financial
statements of such Person delivered to Lender from time to time;
 
(e) Limitations Not Exceeded.  Any making or issuance of any requested Revolving
Loan or Letter of Credit would not cause the Working Capital Obligations to
exceed the lesser of the Revolving Loan Commitment and the Borrowing Base; and
 
(f) Further Assurances.  Each Credit Party shall have delivered such further
documentation or assurances as Lender may reasonably require.
 
5. REPRESENTATIONS AND WARRANTIES.
 
To induce Lender to enter into this Agreement and to make the Loans or extend
credit as provided for herein, each Obligor makes the following representations
and warranties, all of which shall survive the execution and delivery of the
Loan Documents.  Unless otherwise specified, such representations and warranties
shall be deemed made as of the date hereof and as of the date of each request
for a Loan or extension of credit hereunder:
 
5.1 Valid Existence and Power.  Each Obligor and each Subsidiary are
corporations, limited liability companies or limited partnerships, as
applicable, duly incorporated, organized, or formed, validly existing, and in
good standing under the laws of their respective jurisdiction of incorporation,
organization, or formation and are duly qualified or licensed to transact
business in all places where the failure to be so qualified could reasonably be
likely to have a Material Adverse Effect.  Each Obligor, each Subsidiary  and
each other Credit Party  has the power to make and perform the Loan Documents
executed by it and all Loan Documents will constitute the legal, valid, and
binding obligations of such Person, enforceable in accordance with their
respective terms, subject only to bankruptcy and similar laws affecting
creditors’ rights generally.  Each Obligor is organized under the laws of the
jurisdiction set forth in the preamble to this Agreement, and has not changed
the jurisdiction of its organization within the five (5) years preceding the
Closing Date.
 
 
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5.2 Authority.  The execution, delivery, and performance thereof by each Obligor
and each other Person (other than Lender) executing any Loan Document have been
duly authorized by all necessary actions of such Person, and do not and will not
violate any provision of law or regulation, or any writ, order, or decree of any
Governmental Entity or any provision of the governing instruments of such
Person, and do not and will not, with the passage of time or the giving of
notice, result in a breach of, or constitute a default or require any consent
under, or result in the creation of any Lien upon any property or assets of such
Person pursuant to, any law, regulation, instrument, or agreement to which any
such Person is a party or by which any such Person or its respective properties
may be subject, bound, or affected.
 
5.3 Financial Condition.  Other than as disclosed in financial statements
delivered to Lender on or before the Closing Date or on Schedule 5.3, attached
hereto and made a part hereof, none of any Obligor, any Subsidiary, or (to the
knowledge of any Obligor) any Guarantor has any material direct or contingent
obligations or liabilities or any material unrealized or anticipated losses from
any commitments of such Person.  As of the Closing Date, all material operating
and capital leases under which an Obligor, any Subsidiary, or (to the knowledge
of each Obligor) any Guarantor is lessee are disclosed in the financial
statements delivered to Lender on or before the Closing Date or on Schedule
5.3.  All financial statements from time to time delivered to Lender by Obligors
shall have been prepared in accordance with GAAP and fairly present the
financial condition of such Person as of the date thereof.  All Projections
shall be based on Obligors’ Good Faith assessment of the future of its business
at such time and Obligors shall have had a reasonable basis for such assessment
at the time made.  No Obligor is aware of any material adverse fact (other than
facts which are generally available to the public and not particular to such
Obligor, such as general economic trends) concerning the condition (financial or
otherwise) or future prospects of such Obligor or any Subsidiary or any
Guarantor which has not been fully disclosed to Lender, including any material
and adverse change in the operations or financial condition of such Person since
the date of the most recent financial statements delivered to Lender.  Each
Credit Party is Solvent and, after consummation of the transactions set forth in
this Agreement and the other Loan Documents, including the initial disbursements
of Loans and application of the proceeds thereof, will be Solvent. No transfer
of any property is being made by any Obligor,  and no Debt is being incurred by
any Obligor, in connection with the transactions set forth in this Agreement and
the other Loan Documents  with the intent to hinder, delay or defraud either
present or future creditors of such Obligor.
 
5.4 Litigation.  Except as disclosed on Schedule 5.4, attached hereto and made a
part hereof, there are no suits or proceedings pending or, to each Obligor’s
knowledge, threatened by or before any Governmental Entity against or affecting
such Obligor, any Subsidiary or (to Obligors’  knowledge) any Guarantor or other
Credit Party, or their respective assets, which if adversely determined could
reasonably be expected to have a Material Adverse Effect.
 
 
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5.5 Agreements, Etc.  Neither any Obligor nor any Subsidiary is a party to any
agreement or instrument or subject to any order or decree of any Governmental
Entity or any charter or other corporate restriction, adversely affecting its
business, assets, operations, or condition (financial or otherwise), nor is any
such Person in default in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument to which it is a party, or any law, regulation, decree, order, or the
like to which it is subject which, in each such case,  could reasonably be
expected to have a Material Adverse Effect.
 
5.6 Authorizations.  All authorizations, consents, approvals, and licenses
required under applicable law which are necessary and material for the ownership
or operation of the property owned or operated by an Obligor or any Subsidiary
or for the conduct of any business in which it is engaged have been duly issued
and are in full force and effect, and it is not in default, nor has any event
occurred which with the passage of time or the giving of notice, or both, would
constitute a default, under any of the terms or provisions of any part thereof,
or under any order, decree, ruling, regulation, closing agreement or other
decision or instrument of any Governmental Entity having jurisdiction over such
Person, which default would have a Material Adverse Effect on such Person.  No
approval, consent or authorization of, or filing or registration with, any
Governmental Entity is required with respect to the execution, delivery or
performance of any Loan Document.
 
5.7 Title.  Each Obligor and each Subsidiary has good title to all of the assets
shown in its financial statements free and clear of all Liens, except Permitted
Liens.  Obligors alone have full ownership rights in all Collateral.
 
5.8 Collateral.
 
(a) The security interests granted to Lender herein and pursuant to any other
Security Agreement (a) constitute and, as to subsequently acquired property
included in the Collateral covered by the Security Agreement, will constitute,
security interests under the UCC entitled to all of the rights, benefits, and,
if perfected, priorities provided by the UCC and (b) are and, as to such
subsequently acquired Collateral, will be fully perfected, superior, and prior
to the rights of all third persons, now existing or hereafter arising, upon the
filing of a UCC-1 financing statement (with respect to all Collateral which may
be perfected by the filing of a UCC-1 financing statement).  All of the
Collateral is intended for use solely in Obligors’ respective businesses.
 
(b) Schedule 5.8(b) sets forth all of the Credit Parties’ insurance policies in
effect as of the Closing Date and sets forth as to each such policy (as
applicable), in summary form,  the type of insurance provided by such policy,
the underwriter thereof, the maximum coverage provided thereunder, the
deductible applicable thereto, and a brief description of any non-customary term
as set forth therein.  Each of such policies is currently in effect and all
premiums thereon have been paid to date.
 
 
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(c) All patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, copyright applications,
design rights, trade names, assumed names, trade secrets and licenses owned or
utilized by Obligors on the Closing Date and necessary for and material to the
operation of Obligors’ respective businesses are set forth on Schedule 5.8(c)
attached hereto and made part hereof; are valid and have been duly registered or
filed with all appropriate Governmental Entities;  and constitute all of the
intellectual property rights which are necessary for and material to the
operation of its business; there is no objection to or pending challenge to the
validity of any such material patent, trademark, copyright, design right, trade
name, trade secret or license and no Obligor is  aware of any grounds for any
challenge, except as may be set forth in Schedule 5.8(c) attached hereto and
made part hereof.
 
5.9 Jurisdiction of Organization; Location.  The jurisdiction in which each
Obligor and each Subsidiary is organized, the chief executive office of each
Obligor and each Subsidiary, the office where each Obligor’s and each
Subsidiary’s books and records are located, all of each Obligor’s and each
Subsidiary’s other places of business, and any other places where any
Collateral  is kept, are all correctly and completely indicated on Schedule 5.9
attached hereto and made part hereof.  All material Collateral is located and
shall at all times be kept and maintained only at a Permitted Location.  No
material amount of Collateral is attached or affixed to any real property so as
to be classified as a Fixture unless Lender has a Lien on the Real Property on
which such Fixtures are located otherwise agreed in writing.  No Obligor has
changed it legal status or the jurisdiction in which it is organized or moved
its chief executive office or made use of any trade, assumed, or fictitious name
within the five (5) years preceding the Closing Date, except as may be set forth
on Schedule 5.9.
 
5.10 Taxes.  Each Obligor and each Subsidiary have filed all Federal and state
income and other tax returns which are required to be filed, and unless being
Properly Contested or proper extensions have been timely filed, have paid all
taxes as shown on said returns and all taxes, including withholding, FICA, and
ad valorem taxes, shown on all assessments received by it to the extent that
such taxes have become due.  Neither any Obligor nor any Subsidiary is subject
to any Federal, state, or local tax Liens nor has such Person received any
notice of deficiency or other official notice to pay any taxes unless being
Properly Contested.   Each Obligor and each Subsidiary have paid all sales and
excise taxes payable by it unless being Properly Contested.
 
5.11 Labor Law Matters.
 
(a) No goods or services have been or will be produced by any Obligor or any
Subsidiary in material violation of any applicable labor laws or regulations or
any collective bargaining agreement or other labor agreements or in material
violation of any minimum wage, wage-and-hour or other similar laws or
regulations.
 
(b) Except as set forth on Schedule 5.11  attached hereto and made part
hereof,  neither any Obligor nor any Subsidiary is party to or bound by any
collective bargaining agreement, management agreement, or consulting
agreement.  There are no material grievances, disputes, or controversies with
any union or other organization of any Obligor’s or any Subsidiary’s employees,
or, to any Obligor’s knowledge, any asserted or threatened strikes, work
stoppages, or demands for collective bargaining.
 
 
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5.12 Accounts.  Each Account, Instrument, Chattel Paper, and other writing
constituting any portion of the Collateral (a) is genuine and enforceable in
accordance with its terms except for such limits thereon arising from bankruptcy
and similar laws relating to creditors’ rights; (b) is not subject to any
deduction or discount (other than as stated in the invoice and disclosed to
Lender in writing), defense, set-off, claim, or counterclaim of a material
nature against any Obligor except as to which Obligors promptly notified Lender
in writing; (c) is not subject to any other circumstances that would impair the
validity, enforceability or amount of such Collateral except as to which
Obligors promptly notified Lender in writing; (d) arises from a bona fide sale
of goods or delivery of services in the ordinary course and in accordance with
the terms and conditions of any applicable purchase order, contract or
agreement; (e) is free of all Liens; and (f) is for a liquidated amount maturing
as stated in the invoice therefor.  That portion of any Account included in any
Notice of Borrowing, Borrowing Base Certificate, report, or other document as an
Eligible Account meets all the requirements of an Eligible Account set forth
herein.
 
5.13 Judgment Liens.  Neither any Obligor nor any Subsidiary, nor any of their
respective assets, are subject to any unpaid judgments (whether or not stayed)
or any judgment Liens in any jurisdiction, in each case, (a) which were not
disclosed to Lender in writing on or before the Closing Date or (b) of which any
Obligor has not given notice to Lender in accordance with Section 6.4.
 
5.14 Organization Structure.
 
(a) As of the date hereof, Schedule 5.14, attached hereto and made a part
hereof, sets forth (i) the correct name of each Subsidiary and its jurisdiction
of organization; (ii) the name of each of each Obligor’s Affiliates (including,
without limitation, any joint ventures) and the nature of the affiliation; (iii)
the number, type or class, and name of the holder of all issued and outstanding
Equity Interests of each Obligor and each of its Subsidiaries, together with the
number and percentage of Equity Interests held by each such holder; and (iv) the
number of authorized and issued Equity Interests (and treasury shares) of each
Obligor and each Subsidiary, by type or class.
 
(b) Each Obligor has good title to all of the Equity Interests that it purports
to own of each of its Subsidiaries, free and clear in each case of any Lien
other than Permitted Liens.  All such Equity Interests have been duly issued and
are fully paid and non-assessable.  Since the date of the last audited financial
statements of the Consolidated Companies or, as applicable, each Obligor and its
Subsidiaries delivered to Lender, no Obligor has made, or obligated itself to
make, any Restricted Payment, except as otherwise permitted hereunder.  Except
as set forth on Schedule 5.14, there are no outstanding options to purchase, or
any rights or warrants to subscribe for or acquire, or any commitments or
agreements to issue or sell, or any Equity Interests or obligations convertible
into, or any powers of attorney relating to, Equity Interests issued by an
Obligor or any of its Subsidiaries.  Except as may be set forth on Schedule
5.14, with respect to ENGlobal Holdings’ ownership interest in the Equity
Interests of any of its Subsidiaries, there are no outstanding agreements or
instruments binding upon ENGlobal Holdings relating to such Equity Interests
issued by any of its Subsidiaries  relating to the ownership thereof.
 
 
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5.15 Deposit Accounts.  Each Obligor and its Subsidiaries have no Deposit
Accounts other than (a) on the Closing Date, those listed on Schedule 5.15
attached hereto and by reference made part hereof and (b) after the Closing
Date, those permitted by Section 7.15.
 
5.16 Environmental.  Except as disclosed on Schedule 5.16, attached hereto and
made a part hereof, and except for ordinary and customary amounts of solvents,
cleaners and similar materials used in the ordinary course of each Obligor’s or
a Subsidiary’s business and in strict compliance with all Environmental Laws,
none of any Obligor, any Subsidiary, or, to each Obligor’s knowledge, any
current or previous owner or operator of any real property currently owned or
operated by an Obligor or a Subsidiary, has generated, stored, or disposed of
any Regulated Material on any portion of such property, or transferred any
Regulated Material from such property to any other location in material
violation of any applicable Environmental Laws.  Except as disclosed on Schedule
5.16, no Person (other than an Obligor or a Subsidiary) has generated, stored or
disposed of any Regulated Material on any portion of the real property currently
owned or operated by an Obligor or any Subsidiary, and, except for ordinary and
customary amounts of solvents, cleaners and similar materials used in the
ordinary course of an Obligor’s or a Subsidiary’s business and in material
compliance with all Environmental Laws, no Regulated Material is now located on
such property.  Except as disclosed on Schedule 5.16, each  Obligor and its
Subsidiaries is in material compliance with all applicable Environmental Laws
and neither any Obligor nor any Subsidiary has been notified of any action,
suit, proceeding, or investigation which calls into question compliance by an
Obligor or any Subsidiary with any Environmental Laws or which seeks to suspend,
revoke or terminate any license, permit, or approval necessary for the
generation, handling, storage, treatment, or disposal of any Regulated Material.
 
5.17 ERISA. Schedule 5.17 lists all Plans, including any Pension Plans and
Multiemployer Plans,  established by any Credit Party, any of its Subsidiaries,
or, with respect to any such Plan that is subject to Section 412 of the Code or
Title IV of ERISA, an ERISA Affiliate (if any) and, to the extent thereof:
 
(a) Each Plan (if any)  is in material compliance in all material respects with
the applicable provisions of ERISA, the Code, and other Federal and state
laws.  Each Plan that is intended to be a “qualified plan” under Section 401(a)
of the Code has received a favorable determination letter from the Internal
Revenue Service or an application for a favorable determination letter has been
filed with respect thereto and, to the knowledge of the Credit Parties, nothing
has occurred and no action has failed to be taken which could reasonably be
expected to prevent or cause, as applicable, the loss of such qualified
status.  Each Credit Party and its ERISA Affiliates have made all required
contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code or any other relief from minimum funding
standards under Sections 412 or 430 of the Code has been made with respect to
any Plan.
 
(b) There are no pending or, to the knowledge of Obligors, threatened claims,
actions or lawsuits, or action by any Governmental Entity, with respect to any
Plan. No prohibited transaction or violation of the fiduciary rules with respect
to any Plan has occurred.
 
 
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(c) (i) No ERISA Event or event described in Section 4062(e) of ERISA has
occurred and is continuing or is reasonably expected to occur with respect to
any Plan; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no
Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (iv) no Obligor or
ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and
no event has occurred which with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 or Section 4242 of
ERISA with respect to any Multiemployer Plan; and (v) no Obligor or ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
Section 4212 of ERISA.
 
(d) No Plan or trust created thereunder, or party in interest (as defined in
Section 3(14) of ERISA, or any fiduciary (as defined in Section 3(21) of ERISA),
has engaged in a “prohibited transaction” (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) or violated any fiduciary
responsibility rules which would subject such Plan or any other Plan of any
Obligor or any of its ERISA Affiliates,  or any trust created thereunder, or any
such party in interest or fiduciary, or any party dealing with any such Plan or
any such trust to any material penalty or tax on “prohibited transactions”
imposed by Section 502 of ERISA or Section 4975 of the Code.
 
(e) No Credit Party or, to each Credit Party’s knowledge, any of its ERISA
Affiliates has made any promises of pension or welfare benefits to employees,
except as set forth in the Plans.
 
(f) Within the last six (6)  months preceding the Closing Date,  no Pension Plan
with an Unfunded Pension Liability (if any) has been transferred outside the
“controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any
Credit Party or any ERISA Affiliate.
 
(g) With respect to any Foreign Plan, if any (i) all employer and employee
contributions required by law or by the terms of the Foreign Plan have been
made, or, if applicable, accrued, in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded through insurance, or
the book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most recently used to
account for such obligations in accordance with applicable generally accepted
accounting principles; and (iii) it has been registered as required and has been
maintained in good standing with applicable regulatory authorities.  No Credit
Party or any of their Subsidiaries has incurred any obligation in connection
with the termination of or withdrawal from any Foreign Plan.
 
(h) No Obligor is required to contribute to and is not contributing to a
Multiemployer Plan, and  no Obligor has any withdrawal liability to any
Multiemployer Plan.
 
5.18 Investment Company Act.  Neither any Obligor nor any of its Subsidiaries is
an “investment company” as defined in the Investment Company Act of 1940, as
amended.
 
 
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5.19 Insider.  No Obligor is, and no Person having “control” (as that term is
defined in  U.S.C. § 375(b)(5) or in regulations promulgated pursuant thereto)
of an Obligor is, an “executive officer,” “director,” or “principal shareholder”
(as those terms are defined in 12 U.S.C. § 375(b) or in regulations promulgated
pursuant thereto) of Lender, of a bank holding company of which Lender is a
subsidiary, or of any subsidiary of a bank holding company of which Lender is a
subsidiary.
 
5.20 Sanctioned Persons; Sanctioned Countries.  None of any Obligor, its
Subsidiaries, or its Affiliates or any Guarantor or other Credit Party  (a) is a
Sanctioned Person or (b) does business in a Sanctioned Country or with a
Sanctioned Person in violation of the economic sanctions of the United States
administered by OFAC.  No Obligor will use the proceeds of any extension of
credit hereunder to fund any operation in, finance any investments or activities
in, or make any payments to, a Sanctioned Person or a Sanctioned Country.
 
5.21 Compliance with Covenants; No Default.  Each Obligor is, and upon the
making of the initial extensions of credit on the Closing Date will be, in
compliance with all of the covenants hereof.  No Default or Event of Default is
in existence, on the Closing Date, and the execution, delivery, and performance
of the Loan Documents and the making of the initial extensions of credit on the
Closing Date will not cause a Default or  Event of Default to exist.
 
5.22 Full Disclosure.  Each Credit Party has disclosed to Lender each fact and
circumstance which such Credit Party knows or should know and which, by itself
or together with any other fact disclosed or undisclosed, could reasonably be
expected to have Material Adverse Effect.  No Loan Document or any other
agreement, document, certificate, or statement delivered by a Credit Party or a
Subsidiary to Lender contains any untrue statement of a material fact or omits
to state any material fact which is known or which should be known by such
Person necessary to keep the other statements from being misleading.
 
5.23 Collateral Disclosure Certificates.  All information set forth in each
Collateral Disclosure Certificate is true and correct in all material respects
as of the date thereof.
 
5.24 [Intentionally Omitted] .
 
5.25 Brokers.  No brokerage commissions, finder’s fees, investment banking fees,
or similar fees, commissions, or charges are payable or will become payable
under any circumstances in connection with any transactions contemplated by this
Agreement or the other Loan Documents.
 
5.26 Inactive Subsidiaries.  Neither Inactive Subsidiary (i)  owns or holds any
material assets, (ii) has any material  liabilities except any arising pursuant
hereto and under its Guaranty, and (ii) conducts any material business
operations. 
 
 
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6. AFFIRMATIVE COVENANTS.
 
Each Obligor covenants and agrees that from the date hereof until the full and
final payment and performance of the Obligations and the termination of this
Agreement, such Obligor and each Subsidiary:

6.1 Use of Loan Proceeds.  In the case of Borrowers, shall use the proceeds of
the Loans and any Letters of Credit only in accordance with the Permitted
Purposes and shall furnish Lender all evidence it may require with respect to
such uses.
 
6.2 Maintenance of Business and Properties.  Shall at all times (a) (i)
maintain, preserve, and protect all Collateral and the remainder of its material
assets and properties used or useful in the conduct of its business, (ii) keep
the same in good repair, working order, and condition, and (iii) make, or cause
to be made, all material needful and proper repairs, renewals, replacements,
betterments, and improvements thereto so that the business carried on in
connection therewith may be conducted properly and in accordance with standards
generally accepted in businesses of a similar type and size and (b) maintain and
keep in full force and effect all licenses and permits necessary and material to
the proper conduct of its business.
 
6.3 Insurance.
 
(a) Maintenance. Shall (i) maintain (A) liability insurance, workers’
compensation insurance, business interruption insurance, D&O insurance, larceny,
embezzlement and other criminal misappropriation insurance, and casualty
insurance in amounts equal to the greater of (1) such amounts that may be
required by law or (2) such amounts that are customary and usual for prudent
businesses in its industry, or as otherwise may be required by Lender in its
Permitted Discretion from time to time; and (B) any other insurance that may be
required by Lender, in its Permitted Discretion,  from time to time, and (ii)
insure and keep insured all Collateral and other properties with insurance
companies acceptable to Lender, in its Permitted Discretion.   All property,
casualty, hazard and other insurance policies covering any Collateral shall be
in amounts acceptable to Lender, in its Permitted Discretion, shall name and
directly insure Lender pursuant to one or more lender loss payable endorsements
acceptable to Lender, in its Permitted Discretion, and shall not be terminable
except upon thirty (30) days’ written notice to Lender.  All policies of
liability insurance shall be in amounts   in accordance with Borrower’s past
practices, as in effect on the Closing Date, and shall name Lender as an
additional insured thereunder pursuant to one or more endorsements in form and
substance satisfactory to Lender in its Permitted Discretion.   On or before the
Closing Date and thereafter on an annual basis (or at such other more frequent
intervals as Lender may request from time to time in its Permitted Discretion),
Borrower Agent shall furnish Lender copies of all such policies (or summaries
thereof, if requested by Lender) and evidence of insurance in the form of an
Acord Form 27 with respect to casualty and property insurance and an Acord Form
25 with respect to liability insurance.
 
 
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(b) Loss. If any Obligor’s Collateral suffers a casualty or is condemned by a
Governmental Entity (each, a “Loss”), all Net Proceeds of such Loss shall be
paid over to Lender upon such Obligor’s receipt thereof for application to the
Obligations, unless Lender otherwise then agrees in writing in its Permitted
Discretion. with respect to any Equipment or real property constituting
Collateral. If Lender does otherwise agree in writing in respect of Equipment or
real property,  Obligors may apply the Net Proceeds of any such casualty or
condemnation to the repair, restoration, or replacement of the assets suffering
such Loss, so long as (i) such repair, restoration, or replacement is completed
within 180 days after the date of such Loss (or such longer period of time
agreed to in writing by Lender), (ii) while such repair, restoration, or
replacement is underway, all of such Net Proceeds are kept on deposit with
Lender in a separate Deposit Account over which Lender has exclusive Control,
and (iii) such Loss did not cause an Event of Default.  If an Event of Default
occurs and is continuing or such repair, restoration, or replacement is not
completed within 180 days of the date of such Loss (or such longer period of
time agreed to in writing by Lender), Lender may immediately and without notice
to any Person apply all of such Net Proceeds to the Obligations, regardless of
any other prior agreement regarding the disposition of such Net Proceeds.
 
6.4 Certain Notices.  Shall provide Lender prompt but in any case within five
(5) Business Days notice of (a) the occurrence of a Default or Event of Default
and what action (if any) Obligors are taking to correct the same; (b) any
litigation where an Obligor or any Subsidiary is a party defendant involving an
amount at issue in excess of Two Hundred Fifty Thousand Dollars ($250,000) or
material changes in existing litigation or any judgment against it or its assets
in excess of Two Hundred Fifty Thousand Dollars ($250,000);  (c) any damage or
loss to property in excess of Five Hundred Thousand Dollars ($500,000); (d) any
notice from taxing authorities as to claimed deficiencies or any tax lien or any
notice relating to alleged ERISA violations; (e) any ERISA Event, and what
action (if any) Obligors are taking with respect thereto, and when known what
action has been taken or threatened by any Governmental Entity in regard
thereto; (f) any rejection, return, offset, dispute, loss, or other circumstance
in an amount equal to or greater than Five Hundred Thousand Dollars ($500,000)
or otherwise having a Material Adverse Effect on any Collateral; (g) the
cancellation or termination of, or any default under, any Material Agreement
which reasonably could be expected to have a Material Adverse Effect; (h) any
acceleration of the maturity of any Debt of any Credit Party in excess of Two
Hundred Thousand Dollars ($200,000) in principal amount or the occurrence or
existence of any event or circumstances which gives the holder of such Debt in
excess of Two Hundred Thousand Dollars ($200,000) the right to accelerate the
payment of such Debt; and (i) any loss or threatened loss of material licenses
or permits which reasonably could be expected to have a Material Adverse Effect.
 
6.5 Inspections of Books and Records and Field Examinations; Appraisals;
Physical Inventories.  Shall permit Lender and its agents to conduct
inspections, verifications (of accounts and otherwise), appraisals, and field
examinations of the Collateral and such Person’s other property and books and
records at such times and with such frequency as Lender may request from time to
time, with (a) when no Default or Event of Default is in existence, reasonable
notice thereof (barring exigent circumstances) and (b) when any Default or Event
of Default is in existence, no notice thereof.  Obligors shall pay the cost of
such inspections, verifications and field examinations, including the cost of
field examinations, (presently charged at $900 per examiner per day but subject
to increase from time to time plus Lender’s and its agents’ actual out-of-pocket
expenses), limited, however,  in terms of reimbursement, to two (2) per each
period of twelve (12) months following the Closing Date (unless an Event of
Defaults then exists, in which case there shall be no such limitation).
 
 
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6.6 Financial Information.  Shall maintain books and records in accordance with
GAAP and Borrower Agent shall furnish to Lender the following periodic financial
information:
 
(a) Periodic Borrowing Base Information.  As soon as available and in any event
either within fifteen (15)  days after the end of each Fiscal Month or more
frequently if requested by Lender from time to time (unless, in each
case,  Lender, in its Permitted Discretion, has agreed in writing to permit a
longer time period for delivery),  certification of the Borrowing Base in such
form and detail as Lender may request from time to time (a “Borrowing Base
Certificate”).  Borrower Agent shall attach the following to each Fiscal Month
ended Borrowing Base Certificate, which shall be certified by Borrower Agent’s
Senior Officer to be accurate and complete and in compliance with the terms of
the Loan Documents:  (i) a report in form and substance satisfactory to Lender
in its Permitted Discretion listing (A) all Accounts of Obligors as of the last
Business Day of such Fiscal Month, segregated by Obligor, (B) the amount and age
of each Account on a “due date” aging basis, (C) if requested by Lender, in its
Permitted Discretion, or at all times after an Event of Default exists, the name
and mailing address of each Account Debtor, (D) all Accounts which do not
constitute Eligible Accounts, and (E) such other information as Lender may
request in its Permitted Discretion (each, an “Accounts Receivables Report”);
(ii) a report listing (A) all of Obligors’ accounts payable, segregated by
Obligor, which unless otherwise requested by Lender, in its Permitted
Discretion, may be in summary form unless an Event of Default then exists,  (B)
the number of days which have elapsed since the original date of invoice of such
accounts payable, (C) if requested by Lender, in its Permitted Discretion, or at
all times after an Event of Default exists, the name and address of each Person
to whom such accounts payable are owed, and (D) such other detail Lender may
request in its Permitted Discretion (each, an “Accounts Payable Report”); and
(iii) each other report as Lender may from time to time request in its Permitted
Discretion, each prepared with respect to such periods and with respect to such
information and reporting as Lender may request in its Permitted Discretion.
 
(b) Interim Statements.  As soon as available and in any event within thirty
(30) days after the end of each Fiscal Month, (i) balance sheets,  income
statements and statements of cash flows of the Consolidated Companies for such
period (and for the portion of the Fiscal Year ending with such period),
together with all supporting schedules, setting forth in comparative form the
figures for the same period of the preceding Fiscal Year, which shall be
reported on a consolidated and, if requested by Lender, in its Permitted
Discretion, consolidating basis for the Consolidated Companies,  and (ii) if
requested by Lender, in its Permitted Discretion, a report reconciling (A) each
Obligor’s Accounts set forth in the Accounts Receivable Report attached to the
month-ended Borrowing Base Certificate to (B) Obligors’ aggregate Accounts set
forth  in the financial statements delivered to Lender pursuant hereto (which
shall be based upon Obligors’ general ledgers).  The foregoing statements and
reports shall be certified by Borrower Agent’s chief financial officer as true
and correct and fairly representing in all material respects the financial
condition of the Consolidated Companies and, as applicable,  each Obligor and
its Subsidiaries and that such statements are prepared in accordance with GAAP,
except without footnotes and subject to normal year-end recurring audit
adjustments.
 
 
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(c) Annual Statements.  As soon as available and in any event not later than the
earlier of the date that Obligors are required to file their Form 10-K with the
SEC for any Fiscal Year but in any event within  one hundred twenty (120) days
after the end of each Fiscal Year, a detailed report of the Consolidated
Companies,  containing a consolidated and consolidating balance sheet at the end
of such period and a consolidated and consolidating income statement and
statement of cash flows for such period, setting forth in comparative form the
figures for the preceding Fiscal Year, together with all supporting schedules
and footnotes, and containing an unqualified audit opinion of independent
certified public accountants acceptable to Lender that the financial statements
were prepared in accordance with GAAP (which opinion shall not in any case be
subject to any “going concern” or similar assumption, qualification or exception
or any assumption, qualification or exception as to scope of audit).
 
(d) Compliance and No Default Certificate.  Together with each report required
by subsections (b) and (c), a compliance certificate in the form of Exhibit
6.6(d), attached hereto and made a part hereof, and a certificate of a Senior
Officer of Borrower Agent certifying that no Default or Event of Default then
exists or, if a Default or Event of Default then exists, the nature and duration
thereof and Obligors’ intention with respect thereto.  Each such compliance
certificate will be accompanied by a spreadsheet showing Obligors’ calculations
of all financial covenants, which must be of such detail as requested by Lender
from time to time in its Permitted Discretion.   Borrower Agent shall also cause
Obligors’ independent auditor to submit to Lender, together with its audit
report, a statement that, in the course of conducting such audit, it discovered
no circumstances which it believes would result in a Default or an Event of
Default or, if it discovered any such circumstances, the nature and duration
thereof.
 
(e) Auditor’s Management Letters.  Promptly upon receipt thereof, copies of each
report submitted to Borrower Agent or Obligors by independent public accountants
in connection with any annual, interim, or special audit made by them
of  Obligors’ books including, without limitation, each report submitted to
Borrower Agent or Obligors concerning its or their accounting practices and
systems and any final comment letter submitted by such accountants to management
in connection with Obligors’ or the Consolidated Companies’ annual audit.
 
(f) [Intentionally Omitted].
 
(g) ERISA Reports. Promptly upon (and in any event not more than five (5)
Business Days after), Lender’s request for same, copies of any annual report
filed in accordance with or pursuant to ERISA with respect to any Plan together
with such other financial or other information relating to any Plan which
Lender, from time to time, may reasonably request.
 
 
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(h) Projections.  As soon as available and in any event within thirty (30) days
after the beginning of each Fiscal Year, Projections for such Fiscal Year,
prepared on a month-to-month basis.
 
(i) Customer and Vendor List.  As soon as available following the commencement
of each Fiscal Year and in any event within thirty (30) days after Lender’s
request, in its Permitted Discretion,  in any event,  but not more than one (1)
time within any period of twelve (12) consecutive months occurring after the
Closing Date so long as no Event of Default exists, or more frequently if
requested by Lender after any Event of Default exists,  Borrower Agent shall
provide Lender with a listing of all of the Credit Parties’ customers and
vendors and their names and addresses as of the end of the immediately preceding
Fiscal Year or as of such other date requested by Lender in its Permitted
Discretion.
 
(j) Collateral Disclosure Certificate. As soon as available following the
commencement of each Fiscal Year and in any event within thirty (30) days after
Lender’s request, in its Permitted Discretion,  in any event,  but not more than
one (1) time within any period of twelve (12) consecutive months occurring after
the Closing Date so long as no Event of Default exists, or more frequently if
requested by Lender after any Event of Default exists,  Borrower Agent shall,
and shall cause each other Person who has executed and delivered a Collateral
Disclosure Certificate to, execute and deliver a Collateral Disclosure
Certificate with then-current information within  such specified time
period.   The proper disclosure of any information in any Collateral Disclosure
Certificate shall not, in and of itself, constitute any waiver of any Default or
Event of Default which may otherwise exist.
 
(k) Other Information.  Such other information requested by Lender from time to
time in its Permitted Discretion concerning the business, properties, or
financial condition of the Credit Parties and their respective Subsidiaries.
 
6.7 Maintenance of Existence and Rights.  Shall preserve and maintain its legal
existence, authorities to transact business, rights and franchises, trade names,
patents, trademarks, and permits necessary to the conduct of its business.
 
6.8 Payment of Taxes, Etc.  Shall pay before delinquent all of its Debts and
taxes, except to the extent such taxes are being Properly Contested.
 
6.9 Subordination.  If any Event of Default has occurred and is continuing,
shall at Lender’s request cause all (a) Debts and other obligations now or
hereafter owed by any Borrower to any Guarantor or Affiliate (other than trade
debt incurred in the ordinary course of business in compliance with Section 7.7)
to be Subordinated Debt and (b) all trade debt payable by any Borrower to any
Guarantor or Affiliate to be subordinated to the Obligations on terms
satisfactory to Lender.
 
 
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6.10 Compliance; Hazardous Materials. Shall comply in all material respects with
all laws, regulations, ordinances, and other legal requirements, including,
without limitation, ERISA, all securities laws, and all laws relating to
hazardous materials and the environment necessary and material to the continued
operation of an Obligor’s business operations.   Unless approved in writing by
Lender, neither any Obligor nor any Subsidiary shall engage in the storage,
manufacture, disposition, processing, handling, use, or transportation of
Regulated Materials, whether or not in compliance with Environmental Laws,
except for ordinary and customary amounts of solvents, cleaners and similar
materials used in the ordinary course of an Obligor’s or a Subsidiary’s business
and in strict compliance with all Environmental Laws.  Borrower Agent shall
promptly report to Lender any notices of any violations of such laws or
regulations received from any Governmental Entity, along with Obligor’s proposed
corrective action as to such violation.
 
6.11 Further Assurances.  Shall (a) promptly execute and deliver to the Lender,
or cause to be executed and delivered to the Lender, all such further documents,
agreements, and instruments, and (b) take such further action, in each case in
compliance with or for the accomplishment of the covenants and agreements of the
Credit Parties’ in this Agreement and the other Loan Documents, all as may be
necessary or appropriate in connection herewith or therewith and as may be
reasonably requested by Lender.
 
6.12 [Intentionally Omitted].
 
6.13 [Intentionally Omitted].
 
6.14 Covenants Regarding Collateral.
 
(a) Use. Shall use the Collateral only in the ordinary course of its business
and will not permit the Collateral to be used in material violation of any
applicable law or policy of insurance;
 
(b) Defend.  Shall defend the Collateral against all claims and demands of all
Persons, except for Permitted Liens;
 
(c) Third Parties. Shall exercise its best efforts to obtain and deliver to
Lender such Third Party Agreements as Lender may request from time to time,
including for Third Parties existing on the Closing Date,  Third Party
Agreements to be executed and delivered within thirty (3) days after the Closing
Date (with it being understood that the failure for whatever reason to obtain
any such Third Party Agreements shall not itself be an Event of Default, so long
as pursued by Borrowers with due diligence and in Good Faith,  but shall not
also in any way limit Lender’s right to institute Reserves);
 
(d) Delivery Over. Shall promptly deliver to Lender all Items, Instruments,
Chattel Paper, Investment Property in the form of certificated securities, and,
if requested by Lender, Documents which constitute Collateral, in each case
appropriately indorsed to Lender’s order;
 
 
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(e) Electronic Chattel Paper. Shall not create any Electronic Chattel Paper
without concurrently with the creation thereof  granting Lender Control thereof
pursuant to such measures as Lender shall request in its Permitted Discretion;
 
(f) Notices on Intellectual Property.  Shall promptly notify Lender of any
patents, trademarks, or copyrights to which an Obligor or a Subsidiary acquires
title or rights after the Closing Date necessary and material to its business
operations and any license agreements entered into after the Closing Date by an
Obligor or any Subsidiary authorizing any Obligor or such Subsidiary to use any
third party’s patents, trademarks, or copyrights  necessary and material to its
business operations;
 
(g) Notices on Trade Names. Shall give Lender at least thirty (30) days written
notice before using any trade, assumed, or fictitious name not already disclosed
in Schedule 5.9 hereto and shall use all trade, assumed, or fictitious names in
accordance with all applicable laws;
 
(h) Commercial Tort Claims. Shall promptly notify Lender of the existence of any
Commercial Tort Claims which arise after the Closing Date and shall provide
Lender with such information, and otherwise take such action with respect to
such Commercial Tort Claims, as is reasonably necessary for Lender to perfect
its security interest thereon;
 
(i) Certificates of Title. Within three (3) Business Days after Lender’s
request, shall deliver to Lender the original certificates of title or similar
title documents for all of such Person’s owned vehicles and Equipment which are
subject to certificate of title or similar statutes (as contemplated in Section
9-311 of the UCC) and take such further actions from time to time as Lender
requests for purposes of perfecting Lender’s security interest in and to such
vehicles and Equipment;
 
(j) [Intentionally Omitted].
 
7. NEGATIVE COVENANTS.
 
Obligors covenant and agree that from the date hereof and until the full and
final payment and performance of all Obligations and the termination of this
Agreement, each Obligor and each Subsidiary:

7.1 Debt.  Shall not create or permit to exist any Debt, including any
guaranties or other contingent obligations, except the following (“Permitted
Debt”):
 
(a) The Obligations;
 
(b) Endorsement of Items for collection in the ordinary course of business;
 
(c) Debts which are payable to suppliers and other trade creditors and were
incurred in the ordinary course of business, on ordinary and customary trade
terms;
 
 
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(d) Purchase money Debt incurred to purchase Equipment; provided that the amount
of such Debt shall not at any time (i) exceed the purchase price of the
Equipment purchased or (ii) exceed in aggregate principal amount at any time
outstanding for Obligors and their Subsidiaries, collectively,  Three Million
Five Hundred Thousand Dollars ($3,500,000);
 
(e) Unsecured Subordinated Debt, if any, existing on the Closing Date and
disclosed on Schedule 7.1, provided that a currently effective Subordination
Agreement in respect thereof has been executed and delivered to Lender (for
avoidance of any doubt, no Subordinated Debt is outstanding on the Closing
Date);
 
(f) Other Debt (if any)  listed in Schedule 7.1, attached hereto and made a part
hereof, to the extent such Debt exists as of the Closing Date and is not
otherwise permitted by this Section 7.1, together with any Debt incurred in any
refinancing or renewal thereof (each, a “Refinancing”), so long as the principal
amount of such Refinancing is not greater than the existing principal amount of
such Debt, the effective, all-in rate of interest rate to such Refinancing
(including any applicable margin or spread thereto) is no greater than the
effective, all-in rate of interest applicable to such Debt, the principal amount
of such Refinancing does not amortize more quickly than the amortization
applicable to such Debt, the maturity date of such Refinancing is no sooner than
180 days after the date specified in clause (a) of the definition of
“Termination Date,” and the covenants, representations, warranties, and events
of default related to such Refinancing are no more rigorous or onerous as to
each Credit Party than those then existing in connection with such Debt; or
 
(g) Debt of any Subsidiary which is a Credit Party to an  Obligor or to another
Subsidiary which is also a Credit Party;
 
(h) Any Debt incurred under any Hedge Agreements entered into by an Obligor or
any Subsidiary in the ordinary course of business and not for speculative
purposes with Lender or a Lender Affiliate or with a separate counterparty
otherwise acceptable to Lender;
 
(i) Any Debt in respect of surety bonds, performance bonds and similar
obligations not in connection with borrowed money in each case provided in the
ordinary course of Obligors’ business, not to exceed, in the aggregate, Five
Million Dollars ($5,000,000); and
 
(j) Any Debt to insurers,  not to exceed One Million Dollars ($1,000,000),   in
aggregate amount,  incurred for the purpose of financing the payment of
insurance premiums.
 
7.2 Liens.  Shall not create or permit or suffer to exist any Liens on any of
its assets or property,  except the following  (“Permitted Liens”):
 
(a) Liens securing the Obligations;
 
 
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(b) Liens for taxes, assessments, and charges or levies instituted or levied by
any Governmental Entity (but not including any Lien imposed pursuant to ERISA or
any Environmental Law) which are not yet due and payable or which are being
Properly Contested;
 
(c) Liens of Third Parties arising by operation of law so long as the
obligations secured thereby are not past due or are being Properly Contested;
 
(d) Liens existing in respect of deposits or pledges made in the ordinary course
of business in connection with workers’ compensation, unemployment insurance,
social security, and similar laws;
 
(e) Judgment and other similar non-tax Liens arising in connection with court
proceedings, but only to the extent and for so long as (i) the execution or
enforcement of such Liens is and continues to be effectively stayed and bonded
on appeal; (ii) the validity or amount of the claims secured thereby are being
Properly Contested; and (iii) such Liens do not, in the aggregate, materially
detract from the value of the assets of the Person whose assets are subject to
such Lien or materially impair the use thereof in the operation of such Person’s
business;
 
(f) Liens securing purchase money Debt incurred solely to purchase Equipment,
but only to the extent such Liens attach only to the Equipment purchased and
secure no more than the purchase price of such Equipment;
 
(g) Liens in the nature of ownership interests of lessors of real and personal
property to an Obligor or any Subsidiary under leases where an Obligor or such
Subsidiary are lessees,   provided that the obligations arising under such
leases are permitted to be incurred under this Agreement;
 
(h) Liens in favor of a consignor of Goods consigned to an Obligor (as
consignee), but only to the extent such Lien arises on account of Section
9-103(d) of the UCC, subject to its compliance with Section 9-324(b) and (c) of
the UCC;
 
(i) Liens in favor of subcontractors to the extent arising by operation of law
so long as the obligations secured thereby are not past due or are being
Properly Contested; and
 
(j) Other Liens (if any) listed in Schedule 7.2, attached hereto and made a part
hereof, to the extent such Liens exist as of the Closing Date and are not
otherwise permitted by this Section 7.2.
 
7.3 Restricted Payments; Prepayments; Payments on Subordinated Debt.
 
(a) Restricted Payments.  Shall not make any Restricted Payment, except that (i)
any Subsidiary of an Obligor may pay dividends and make other Restricted
Payments to such Obligor or another Subsidiary whose Equity Interests are
wholly-owned by such Obligor and which also at such time is an Obligor.
 
 
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(b) Prepayments. Shall not prepay any Debt (other than trade payables in the
ordinary course of business),  except for the Obligations if and to the extent
expressly permitted hereunder  or under any Loan Documents issued with respect
thereto, and subject to any terms or conditions governing prepayment set forth
herein or therein.
 
(c) Subordinated Debt. Shall not make any payment on Subordinated Debt, except
that an Obligor or any Subsidiary may make payments of accrued interest or
principal on Subordinated Debt, as and when due in accordance with the terms
thereof as in effect on the Closing Date, but only to the extent each such
payment is otherwise then expressly permitted to be made under the terms of the
Subordination Agreement related thereto. For avoidance of any doubt, no
Subordinated Debt is outstanding on the Closing Date.
 
7.4 Loans and Other Investments.  With respect to any Person, shall not (a) make
or permit to exist any cash advances or loans to such Person, (b) guarantee or
become contingently liable, directly or indirectly, in connection with any Debts
(other than Debts permitted to be incurred under Section 7.1), , liabilities,
obligations, leases, Equity Interests, or dividends or distributions of such
Person, (c) own, purchase, or make any commitment to purchase any Equity
Interests, bonds, notes, debentures, or other securities of, or any interest in
such Person, or (d) make any capital contributions to such Person, whether in
cash or other property (all of which are sometimes collectively referred to
herein as “Investments”), except for (i) Approved Cash Investments, (ii)
Investments in Subsidiaries existing on the Closing Date and disclosed in
Schedule 7.7;  (iii) additional Investments in a Borrower by any other Borrower,
including by way of intercompany loans and cash advances;  (iv) endorsement of
negotiable Instruments for collection in the ordinary course of business; (v)
advances to employees, officers and directors for business travel and other
expenses incurred in the ordinary course of business which do not at any time
exceed in the aggregate as to all such Persons, collectively, Five Hundred
Thousand Dollars ($500,000); (vi) any Hedge Agreements entered into in the
ordinary course of business and not for speculative purposes with Lender (or a
Lender Affiliate) or a counterparty reasonably acceptable to Lender; and
(vii)  up to Fifty Thousand Dollars ($50,000), in the aggregate, may be loaned
or advanced by Obligors to each Inactive Subsidiary in each Fiscal Year prior to
any Inactive Subsidiary Dissolution affecting it to fund the maintenance of its
corporate existence and franchises.
 
7.5 Change in Business; Activities Covered by Insurance.
 
(a) New Business. Shall not enter into any business which is substantially
different from the business in which it is engaged on the Closing Date.
 
(b) Insured Activity. Shall not (i) undertake any business or other activity
which is not insured by such the policies of insurance as required by Section
6.3 or (ii) permit or undergo any changes in its business and related activities
which could result in the termination, revocation, ineffectiveness, or
unenforceability of any of such policies of insurance.
 
 
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7.6 Accounts.  (a) Shall not sell, assign, or discount any of its Accounts,
Chattel Paper, or Instruments other than the discount of Instruments in the
ordinary course of business for collection; (b) shall not create or accept any
Account, Instrument, Chattel Paper or other obligation of any kind due from or
owed by a Sanctioned Person or own any Chattel Paper in the form of a lease
where (i) the lessee thereunder is a Sanctioned Person and (ii) such Chattel
Paper is Collateral; and (c) shall promptly notify Lender in writing of (i) any
discount, set-off, or other deductions not shown on the face of an invoice
relating to any Account involving an amount in excess of One Hundred Thousand
Dollars ($100,000), (ii) any dispute over an Account involving an amount in
excess of One Hundred Thousand Dollars ($100,000);  and (d) any information
relating to a material and  adverse change in any Account Debtor’s financial
condition or ability to pay its obligations or a change in an Account Debtor’s
status as a Sanctioned Person.
 
7.7 Transactions with Affiliates.  Shall not, whether in the ordinary course of
business or otherwise, (a) directly or indirectly purchase, acquire, lease, or
license any property from any Affiliate, (b) sell, transfer, lease, or license
any property to any Affiliate, unless such Subsidiary is a Borrower, (c) pay any
management, consulting, or similar fees to any Affiliate, or (d) otherwise deal
with any Affiliate, other than (i) where such Affiliate is a Subsidiary and a
Credit Party, (ii) transactions described on Schedule 7.7, attached hereto and
made a part hereof, and (iii) transactions on arm’s length terms which are no
less favorable to an Obligor or such Subsidiary than would exist if the parties
thereto were not Affiliates and for which Lender has received prior written
notice.
 
7.8 No Change in Name, Offices, or Jurisdiction of Organization; Trade Names;
Removal of Collateral.  Shall not (a) change its legal name or the jurisdiction
in which it is organized, (b) conduct business under any trade name, assumed
name, or fictitious name which was not listed in Schedule 5.9 hereto, (c) unless
it shall have given sixty (60) days’ advance written notice thereof to Lender,
change the location of its chief executive office or other office where books or
records are kept, (c) locate its chief executive office or keep its books and
records in any jurisdiction other than in a state within the United States of
America or the District of Columbia, (c) amend, restate, or modify its articles
or certificate of incorporation, organization, formation, or limited partnership
in any manner which would be contrary to the terms and conditions of this
Agreement or the other Loan Documents or in any manner which could reasonably be
expected to have a Material Adverse Effect, or (d) permit any Equipment or other
tangible Collateral to be located at any location other than a Permitted
Location. Notwithstanding the foregoing, nothing contained herein, in Section
7.12, in Section 7.13 or in any other provision of this Agreement or any other
Loan Document  shall restrict or prohibit the right of Borrowers to implement
any Inactive Subsidiary Dissolution at any time hereafter upon giving at least
five (5) Business Days’ advance written notice to Lender but without the
necessity of Lender’s consent thereto or the consent thereto of any Lender
Affiliate then party to any Loan Document.
 
7.9 No Sale, Leaseback.  Shall not enter into any sale-and-leaseback or similar
transaction.
 
7.10 Margin Stock.  Shall not use any proceeds of any Loan other than for
Permitted Purposes and, in any event, not to purchase or carry any margin stock
(within the meaning of Regulation U of the Board of Governors of Federal Reserve
System) or extend credit to others for the purpose of purchasing or carrying any
margin stock.
 
 
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7.11 Tangible Collateral.  Shall not (a) allow any Collateral to be commingled
with, or become an Accession to or part of, any property of any other Person or
(b) allow any Collateral to become a Fixture (other than Fixtures located at
real property on which Lender has a first priority security interest and
perfected Lien, and only so long as Lender retains such first-priority  security
interest in and perfected Lien on such real property and Fixtures).
 
7.12 Subsidiaries.  Shall not (a) acquire, create  or form any Subsidiary, (b)
cause or permit any Subsidiary to dissolve, voluntarily or involuntarily, or (c)
permit any Subsidiary to issue any Equity Interests except to an Obligor or the
Subsidiary which is then  the owner thereof. Without limitation of the
foregoing, if and to the extent any Subsidiary is acquired, created or formed
hereafter with the prior written consent of Lender, as a condition to any such
consent becoming effective, such Subsidiary must be joined as an Obligor
hereunder or, with Lender’s approval,  become a Subsidiary Guarantor, in each
case, on terms and conditions acceptable to Lender.
 
7.13 Liquidation, Mergers, Consolidations, and Dispositions of Assets; Good
Standing.  Shall not (a) merge, reorganize, consolidate, or amalgamate with any
Person except a merger or consolidation between Subsidiaries or between one or
more Subsidiaries and an Obligor where such Obligor is the survivor thereof; (b)
liquidate, wind up its affairs or dissolve itself; (c) acquire by purchase,
lease, or otherwise any of the assets of any Person, except for the acquisition
of Equipment (to the extent not prohibited hereunder) in the ordinary course of
business; (d) sell, transfer, lease, or otherwise dispose of any of its assets,
except for (1) the  voluntary termination of Hedge Agreements to which an
Obligor or such Subsidiary is a party and (2) as set forth in the last sentence
of this section in regard to the Steele Note and the Aspen Note; (e) sell or
dispose of any Equity Interests in any Subsidiary, whether in a single
transaction or in a series of related transactions; (f) change its Federal
Employer Identification Number; or (g) fail to remain in good standing and
qualified to transact business as a foreign entity in any state or other
jurisdiction in which it is required to be qualified to transact business as a
foreign entity and in which the failure to do so could reasonably be expected to
have a Material Adverse Effect. Notwithstanding the foregoing subsection (d), so
long as no Event of Default has occurred which is then continuing, the Borrowers
may sell or otherwise dispose of, the Steele Note or the Aspen Note, or both,
(which sale or other disposition may include the restructuring of the terms of
payment of either such instrument, a forgiveness of a part of the Debt owing
thereunder in settlement thereof, or the conversion of all or a part of such
instrument to another form of Debt or an equity instrument) to one or more third
parties (including the issuers thereof) which are not Affiliates of any
Borrower, provided that (1) the Lien and security interest of Lender in such
instruments granted hereby shall continue in all Proceeds derived by Borrowers
from any such sale or other disposition and (2) Borrowers shall notify Lender
promptly after (but in any event within five (5) Business Days after) completing
any such sale or other disposition and tender to Lender at such time all such
Proceeds therefrom for application to the Obligations, if cash, but otherwise
(if taken in the form of other instruments or equity interests) to hold as
additional Collateral.
 
7.14 Change of Fiscal Year or Accounting Methods.  Shall not change its Fiscal
Year, Fiscal Quarters or Fiscal Months or its accounting methods from those in
effect on the Closing Date.
 
 
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7.15 Deposit Account; Exclusive Control.  Shall not open or maintain any Deposit
Accounts except for (a) Deposit Accounts with Lender; (b) Approved Cash
Investments; (c) Deposit Accounts existing on the Closing Date and listed on
Schedule 5.15, provided that such Deposit Accounts are terminated as soon as
practicable after, but in any case within sixty (60) days after the Closing Date
or within such time period Obligors or such Subsidiary shall have complied with
clause (d) below in regard thereto; (c) if and to the extent approved in writing
by Lender from time to time,  Deposit Accounts which are not with Lender but
which are subject to Lender’s Control on terms satisfactory to Lender; (d) such
other Deposit Accounts as shall be necessary for payroll, petty cash, local
trade payables, and other occasional needs of an Obligor or any Subsidiary in
the ordinary course of its business if and to the extent reviewed with and
approved by Lender in its Permitted Discretion from time to time; provided that
the aggregate balance of any Deposit Accounts which are not subject to Lender’s
Control on terms acceptable to Lender pursuant to this clause (d) may not at any
time exceed, as to Obligors and such Subsidiaries collectively, Fifty Thousand
Dollars ($50,000) without Lender’s prior written consent; and (e) Deposit
Accounts located outside the United States of America  with foreign banks used
solely for the depositing of monies in respect of the Caspian Contracts.  Each
Obligor shall maintain its primary Deposit Account and cash management Deposit
Accounts and all Approved Cash Investments with Lender or a Lender
Affiliate.   All Deposit Accounts and Approved Cash Investments maintained with
Lender or an Affiliate of Lender shall be deemed to be under Lender’s exclusive
control.
 
7.16 Material Agreements.  Shall not alter, amend, restate, supplement, or
otherwise modify any Material Agreement without Lender’s prior written consent
if such action would contravene any material provision of this Agreement or any
Loan Document or, in any event, could reasonably be expected to have a Material
Adverse Effect.
 
7.17 Disqualified Equity Interest. Shall not issue or suffer to exist any
Disqualified Equity Interests or be subject to any obligation that requires an
Obligor or any Subsidiary to purchase redeem, retire or otherwise acquire for
value under any circumstances any Equity Interests issued by an Obligor or such
Subsidiary, including any “put” or similar rights
 
7.18 Negative Pledge. Shall not enter into or suffer to exist any agreement
(other than any in favor of Lender) prohibiting or conditioning (i) the creation
or incurrence of any Debt, or the guaranty thereof, or the prepayment of any
Debt;  (ii) the creation or assumption of any Lien,  (iii) the payment of any
dividend or distribution or the making of any other Restricted Payment, (iv) the
repayment of intercompany Debt, or any payables; or (v) the amendment,
modification, extension or renewal of any agreement evidencing any Funded Debt.
 
7.19 Trading with Enemy Act.  Shall not engage in any business or activity in
violation of the Trading with Enemy Act.
 
7.20 Inactive Subsidiaries.  Each Inactive Subsidiary shall not, and no Obligor
shall cause or permit any Inactive Subsidiary to, (i)  own or hold any material
assets, (ii)  incur any liabilities except any arising pursuant hereto and under
its Guaranty, or (ii)  conduct any material business operations.
 
 
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8. FINANCIAL COVENANTS.
 
8.1 Definitions.  As used in this Agreement:
 
(a) “EBITDA” means, for any period of determination and without duplication, the
sum of (i) consolidated net income of the Consolidated Companies for such period
determined in accordance with GAAP applied on a consistent basis (computed
without regard to any extraordinary items of gain or loss), plus (ii) to the
extent included in the calculation of revenue in computing consolidated net
income for such period, the sum of (A) interest expense, (B) income tax
expense,  (C) depreciation and amortization expense, plus (iii) all non-cash
charges or losses, minus (iv) all non-cash income.
 
(b) “Fixed Charge Coverage Ratio” means, at any time of determination and for
any period, for the Consolidated Companies on a consolidated basis,  (i) the sum
of (A) EBITDA for such period, minus (B) all Capital Expenditures made in such
period with the proceeds of Revolving Loans or otherwise paid from cash on hand,
minus (C) all Restricted Payments made in such period, minus (D) cash taxes paid
by the Consolidated Companies in such period (net of any refunds received by the
Consolidated Companies in such period), divided by (ii) the sum without
duplication of (A) cash interest payments made on Funded Debt in such period,
plus (B) the current portion of scheduled principal amortization on Funded Debt
coming due in the next twelve (12)  months as of the end of the most recent
Fiscal Month in such period plus (C) without duplication, any prepayments  of
Funded Debt (whether voluntary or mandatory) or payments of Subordinated
Debt  made in such period.
 
(c) “Funded Debt” means, at any time of determination and without duplication,
for the Consolidated Companies on a consolidated basis, (i) Debt for borrowed
funds, (ii) Debt evidenced by notes, bonds, debentures, or other instruments
(other than checks drawn in the ordinary course of business), (iii) the
principal component of all Debt in the form of capital leases; (iv) all Debt
that is secured by a Lien, (v) Debt for the deferred payment by one year or more
of any purchase money obligation, and (vi) any Debt which constitutes
Subordinated Debt.
 
8.2 Financial Covenants.  Obligors covenant and agree that, from the date hereof
and until the full and final payment and performance of all Obligations and the
termination of this Agreement, Obligors shall comply, or cause the Consolidated
Companies to comply,  with each of the following covenants:
 
(a) Fixed Charge Coverage Ratio.  As of the end of each Fiscal Month beginning
with the Fiscal Month ending on or closest to August  31, 2014, Obligors shall
not permit the Fixed Charge Coverage Ratio for the Applicable Fiscal Period
(defined below) to be less than  1.10 to 1.00. As used herein, “Applicable
Fiscal Period” means (i) for the Fiscal Month ended on or about August  31,
2014, the eleven (11) Fiscal Months then ended, and (ii) for the Fiscal Month
ending September 30, 2014, and each Fiscal Month ending thereafter, the twelve
(12) Fiscal Months then ending.
 
 
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(b) Capital Expenditures.  Obligors shall not permit Capital Expenditures during
any Fiscal Year, beginning with the Fiscal Year ending on or closest to December
31, 2014  to exceed Three Million Five Hundred Thousand Dollars ($3,500,000).
For purposes hereof, the amount of any “lost in hole” revenue of Obligors shall
be subtracted from the amounts deemed  paid for Capital Expenditures.
 
9. DEFAULT.
 
9.1 Events of Default.  Each of the following shall constitute an Event of
Default:
 
(a) Payment. Any Borrower shall fail to pay when due any principal of or
interest on any Note, any fee or other amounts due to Lender hereunder or any
other Loan Document, or (except as provided in (b) and (c) below) any other
Obligations; or
 
(b) Covenant Defaults/No Grace. Any Obligor shall default in the observance or
performance of any agreement, covenant, or obligation contained in (i) Section
6.1, 6.3,  6.4, 6.5, 6.6 (except as set forth in clause (i) of Section 9.1(c)
below)  6.9  or 6.14, or Section 7 or Section 8; or
 
(c) Covenant Defaults/Grace. Either (i) Any Obligor shall fail to comply with
the stated deadline for delivery of any certificates, reports or other data
specified in Section 6.6, provided  that such breach shall not be an Event of
Default if such delivery is made within five (5) Business Days after the date
such report was otherwise due and no other breach of Section 6.6 in regard to
deliveries has occurred more three (3) times in the preceding twelve (12) months
period; or (ii) any Obligor, any Subsidiary or any Credit Party (other than
Lender) shall default in the observance or performance of any other agreement,
covenant, or obligation contained in this Agreement or such Loan Document not
provided for elsewhere in this Section 9 and the breach of such agreement,
covenant, or obligation shall not have been cured to Lender’s satisfaction
within thirty (30) days after the sooner to occur of (i) any Senior Officer’s
receipt of notice of such breach from Lender or (ii) the date on which such
failure or neglect first became known to any Senior Officer; provided, however,
that such notice and opportunity to cure shall not apply in the case of any
default on an agreement, covenant, or obligation which is not capable of being
cured at all or within such 30-day period or which was a willful and knowing
breach by an Obligor, documented in writing; or
 
(d) Misrepresentations. Any representation or warranty made by an Obligor
or  any Credit Party in this Agreement or any other Loan Document, or in any
certificate or report furnished in connection with this Agreement or any other
Loan Document, shall prove to have been untrue or incorrect in any material
respect when made; or
 
(e) Other Defaults to Lender. Any Obligor, any Subsidiary or any Credit Party
shall default in any Debt, liability or obligation not otherwise constituting
Obligations  and covered in clause (a) to this Section 9.1, which (i) is owed to
Lender or any Lender Affiliates and (ii) arose under any agreement other than a
Loan Document, but only if such default was not waived in writing by the holder
thereof or cured by the Obligor thereunder within any applicable grace or cure
period provided for in such agreement; or
 
 
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(f) Cross-Default. Any Obligor, any Subsidiary or any Credit Party shall fail to
make any payment in respect of outstanding Debt (other than the Obligations)
having an aggregate outstanding principal amount in excess of Five Hundred
Thousand Dollars ($500,000) or more when due or after the expiration of any
applicable grace or cure  period, or any event or condition shall occur which
results in the acceleration of the maturity of such Debt having an aggregate
outstanding principal amount in excess of Five Hundred Thousand Dollars
($500,000) or more (including, without limitation, any required mandatory
prepayment or “put” of such Debt to any such Person) or which enables (or, with
the giving of notice or passing of time or both, would enable) the holders of
such Debt having an aggregate outstanding principal amount in excess of Five
Hundred Thousand Dollars ($500,000) or more (or any Person acting on such
holders’ behalf) to accelerate the maturity thereof (including, without
limitation, any required mandatory prepayment or “put” of such Debt to such
Person); or
 
(g) Voluntary Proceedings.  Any Obligor or any Subsidiary or any Credit
Party  shall (i) voluntarily dissolve, liquidate, or terminate operations or
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of such Person or of all or of a
substantial part of its assets, (ii) admit in writing its inability, or be
generally unable, to pay its debts as the debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition, or adjustment of debts,
(vi) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Federal Bankruptcy Code, or (vii) take any action for the purpose of effecting
any of the foregoing; or
 
(h) Involuntary Proceedings. An involuntary petition or complaint shall be filed
against any Obligor or any Subsidiary or any Credit Party seeking bankruptcy
relief or reorganization or the appointment of a receiver, custodian, trustee,
intervenor, or liquidator of any Obligor or any Subsidiary or any Credit Party,
of all or substantially all of its assets, and such petition or complaint shall
not have been dismissed within sixty (60) days of the filing thereof; or an
order, order for relief, judgment, or decree shall be entered by any competent
Governmental Entity approving or ordering any of the foregoing actions; or
 
(i) Judgments. A judgment of more than Five Hundred Thousand Dollars ($500,000)
in excess of insurance coverage therefor (as provided by an underwriter
acceptable to Lender, where such underwriter has agreed in writing to pay such
judgment, and for which the deductible does not exceed an amount approved by
Lender in its Permitted Discretion, shall be rendered against any Obligor or any
Subsidiary or any Credit Party and shall remain undischarged, undismissed, and
unstayed for more than thirty (30)  days or there shall occur any levy upon, or
attachment, garnishment, or other seizure of, any portion of the Collateral or
other assets of Obligor, any Subsidiary, or any Credit Party in excess of Two
Hundred Fifty Thousand Dollars ($250,000) by reason of the issuance of any tax
levy, judicial attachment, garnishment, or levy of execution; or
 
 
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(i) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan or
Multiemployer Plan that has resulted or could reasonably be expected to result
in liability of any Credit Party or any of its Subsidiaries or any ERISA
Affiliate to a Pension Plan, Multiemployer Plan, or PBGC or that constitutes
grounds for appointment of a trustee for or termination by the PBGC of any
Pension Plan or Multiemployer Plan; (ii) any Credit Party or any of its
Subsidiaries or any ERISA Affiliate shall fail to pay when due any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan; (iii) any Plan or trust created under any Plan of
any Credit Party or any of its Subsidiaries or any ERISA Affiliate shall engage
in a non-exempt “prohibited transaction” (as such term is defined in Section 406
of ERISA or Section 4975 of the Code) which would subject any such Plan, any
trust created thereunder, any trustee or administrator thereof, or any party
dealing with any such Plan or trust to any material tax or penalty on
“prohibited transactions” imposed by Section 502 of ERISA or Section 4975 of the
Code; or
 
(j) Guarantor. Any Guarantor or other Credit Party shall repudiate, revoke, or
attempt to revoke its obligations under any Guaranty or other Loan Document,  in
whole or in part; or
 
(k) Damage to Collateral. There shall occur any loss, theft, damage, or
destruction of any material portion of the Collateral for which there is either
no insurance coverage or for which, in Lender’s opinion, in its Permitted
Discretion, there is insufficient insurance coverage or could reasonably be
expected to have a Material Adverse Effect; or
 
(l) Disruption. There shall occur any disruption of any Obligor’s or any
Subsidiary’s business (whether because of strike, work stoppage, natural event
or otherwise) or any change in the condition (financial or otherwise) of any
Obligor, any Subsidiary or any Credit Party which, in Lender’s opinion, in its
discretion, could reasonably be expected have a Material Adverse Effect; or
 
(m) Control.  Any Change of Control shall occur; or
 
(n) Crimes.  Any Credit Party or Senior Officer thereof is criminally indicted
or convicted for (i) a felony committed in the conduct of such Credit Party’s
business, or (ii) a violation of any state or federal law (including the
Controlled Substances Act, the Money Laundering Control Act of 1986 or the
Illegal Exportation of War Materials Act) that could lead to the forfeiture of
any Collateral; or
 
(o) Certain Contracts.  Any material default by any Obligor shall occur in the
Canrig Contract or any Caspian Contract that results in a Material Adverse
Effect.
 
9.2 Remedies.  During the existence of any Default or Event of Default,  Lender
may, without notice to Obligors  and at its option, refuse to make Loans, issue
Letters of Credit, or make other extensions of credit to Borrowers or any of
them, or to any Obligor.   During the existence of any Event of Default, Lender
may at its option, in  addition,  take any or all of the following actions
either directly or through one or more agents or sub-agents or otherwise:
 
 
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(a) Accelerate Payment. Lender may declare any or all Obligations (other than
Obligations under any Hedge Agreements between any Obligor and Lender or any
Lender Affiliate, all of which shall be due in accordance with and governed by
the provisions of said Hedge Agreements) to be immediately due and payable (if
not earlier demanded) (provided, that, upon the occurrence of any Event of
Default described in Sections 9.1(g) or 9.1(h), all Obligations shall
automatically become immediately due and payable without necessity of any such
demand or declaration), terminate its obligation to make Loans and other
extensions of credit to Borrowers, bring suit against Obligors, any Guarantor or
any Credit Party  to collect the Obligations, exercise any remedy available to
Lender hereunder or at law, and take any action or exercise any remedy provided
herein or in any other Loan Document or under applicable law.
 
(b) Collateral. Without waiving any of its other rights hereunder or under any
other Loan Document, Lender shall have all rights and remedies of a secured
party under the UCC (and the Uniform Commercial Code of any other applicable
jurisdiction) and such other rights and remedies as may be available hereunder,
under other applicable law, or pursuant to contract.  If requested by Lender,
Obligors will promptly assemble the Collateral and make it available to Lender
at a place designated by Lender.  Obligors agree that any notice by Lender of
the sale or disposition of the Collateral or any other intended action
hereunder, whether required by the UCC or otherwise, shall constitute reasonable
notice to Obligors if the notice is delivered to Borrower Agent in
accordance  with Section 10.4 at least five (5) Business Days before the action
to be taken.  The proceeds realized from the sale or other disposition of any
Collateral shall be applied to the payment of the Obligations in such order and
manner as Lender in its discretion shall determine.   Each Credit Party shall be
liable for any deficiencies in the event the proceeds of the disposition of the
Collateral do not satisfy the Obligations in full.  In connection with the
foregoing, and notwithstanding any other terms of this Agreement or any Loan
Document which may be to the contrary, Lender agrees not to exercise any right
or remedy to sell or otherwise dispose of any Collateral (including particularly
but without limitation any trademarks, patents or copyrights) pursuant hereto
unless and until an Event of Default has occurred which is then continuing, and
as a result thereof payment in full of the Obligations has been accelerated in
accordance with the terms of this Agreement.  In connection with the foregoing,
and notwithstanding any other terms of this Agreement or any Loan Document which
may be to the contrary, Lender agrees not to exercise any right or remedy to
sell or otherwise dispose of any Collateral (including particularly but without
limitation any trademarks, patents or copyrights) pursuant hereto unless and
until an Event of Default has occurred which is then continuing, and as a result
thereof payment in full of the Obligations has been accelerated in accordance
with the terms of this Agreement.
 
(c) Collect Accounts. Lender may demand, collect, and sue for all amounts owed
pursuant to Accounts, General Intangibles, Chattel Paper, Instruments, or
Documents or for proceeds of any Collateral (either in the applicable Obligor’s
name or Lender’s name at Lender’s option), with the right to enforce,
compromise, settle, or discharge any such amounts.
 
(d) License. Each Obligor hereby grants Lender a worldwide, non-exclusive, and
royalty-free license to use solely during the existence of an Event of Default
Obligor’s or any Subsidiary’s trademarks, service marks, and trade names for
purposes of invoicing and collecting Accounts and otherwise disposing of or
liquidating Collateral in the same manner and to the same extent as such
trademarks, service marks, and trade names are used by Obligors in their
ordinary course of business for such purposes.
 
 
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9.3 Receiver.  In addition to any other remedy available to it, Lender shall
have the absolute right, during the existence of an Event of Default, to seek
and obtain the appointment of a receiver to take possession of and operate
and/or dispose of the business and assets of each Obligor and its Subsidiaries;
and each Obligor hereby consents (for itself and on behalf of any Subsidiaries)
to any such appointment and hereby waives any objection that such Obligor (or
any such Subsidiary) may have thereto or the right to have a bond or other
security posted by Lender in connection therewith.
 
9.4 Insurance.  Each Obligor (a) authorizes Lender to, during the existence of
an Event of Default, collect and apply against the Obligations when due any
refund of insurance premiums or any insurance proceeds payable on account of the
loss or damage to any Collateral and (b) irrevocably appoints Lender as its
attorney-in-fact (which power is coupled with an interest and shall be
irrevocable) to endorse any check or draft or take other action necessary to
obtain such funds
 
9.5 Set Off. In addition to and not in limitation of all rights of set off or
bankers lien that Lender or any Lender Affiliate may have under applicable law,
Lender and each such Lender Affiliate shall have the absolute right, during the
existence of any Event of Default, to set off and apply any and all deposits of
any type at such time held and any Debt owing by Lender or any such Lender
Affiliate to or for the credit of or account of any Obligor against any and all
of the Obligations, provided that Lender or such Lender Affiliate gives prompt
written notice to Borrower Agent of such set off and application after its
occurrence.
 
10. MISCELLANEOUS.
 
10.1 No Waiver; Remedies Cumulative.  No failure or delay on the part of Lender
to exercise any right under this Agreement, any other Loan Document, or
applicable law shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.  The remedies herein provided are
cumulative and are in addition to any other remedies provided by applicable law,
any Loan Document, or otherwise.
 
10.2 Survival of Representations.  All representations and warranties made in
this Agreement and the other Loan Documents shall survive the making of any
extension of credit hereunder and the delivery of any Note and shall continue in
full force and effect until the full and final payment and performance of the
Obligations and the termination of this Agreement.
 
 
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10.3 Indemnity By Obligors; Expenses.  In addition to all other Obligations, the
obligations and liabilities described in this Section 10.3 shall constitute
Obligations and shall be in addition to, and cumulative of, any other
indemnification provisions set forth herein or in any other Loan Document.  Each
Obligor agrees to defend, protect, indemnify, and hold harmless Lender and the
Lender Affiliates and all of their respective officers, directors, employees,
attorneys, consultants, and agents from and against any and all losses, damages,
liabilities, obligations, penalties, fines, fees, costs, and expenses
(including, without limitation, reasonable attorneys’ and paralegals’ fees,
costs and expenses, and fees, costs and expenses for investigations and experts)
incurred by such indemnitees, whether before or from and after the Closing Date,
as a result of or arising from or relating to (a) all legal, accounting,
appraisal, consulting, and other fees, costs, and expenses incurred by Lender or
any of the Lender Affiliates in connection with their due diligence effort
(including, without limitation, the allocable portion of the reasonable fees,
costs and expenses of Lender’s internal legal counsel, or, in lieu thereof, a
flat charge, which may be expressed as a “documentation fee”) and public records
searches, recording fees, examinations, and investigations of the properties of
the Credit Parties or any of their Subsidiaries and their respective
operations), negotiation, preparation, execution, performance of any of the Loan
Documents or of any document executed in connection with the transactions
contemplated hereby or thereby, perfection of Lender’s Liens in the Collateral,
maintenance of the Loans by Lender, and any and all amendments, modifications,
and supplements of any of the Loan Documents, or work-out or restructuring of
the Obligations; (b) any suit, investigation, action, or proceeding by any
Person (other than an Obligor), whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any Person under any statute,
regulation, or common law principle, arising from or in connection with Lender’s
making extensions of credit or furnishing funds to an Obligor under this
Agreement; (c) Lender’s preservation, administration, and enforcement of its
rights under the Loan Documents and applicable law, including, without
limitation, (i) all fees, costs of collection, attorneys’ fees and expenses
(including, without limitation, the allocable portion of fees, costs and
expenses of Lender’s internal legal counsel, or, in lieu thereof, a flat charge,
which may be expressed as a “documentation fee”) of, or advances by, Lender
which Lender pays or incurs (A) in discharge of obligations of any Credit Party,
(B) to inspect, repossess, remove, transport, deliver, protect, store, preserve,
complete, collect, store, sell or otherwise dispose of any Collateral, or (C) in
connection with the appointment and administration of any receiver; (ii) the
administration of and actions relating to any Collateral, this Loan Agreement or
the other Loan Documents and the transactions contemplated hereby and thereby,
including any actions taken to perfect or maintain priority of Lender's Liens on
any Collateral, to maintain any insurance required hereunder or to verify
Collateral; and (iii) subject to Section 6.5, each inspection, audit, field
examination, or appraisal with respect to any Obligor, any Guarantor, or any of
their Subsidiaries, whether prepared by Lender's personnel or a third party; and
(d) the fees and disbursements of counsel for Lender in connection therewith
(including, without limitation, the allocable portion of fees, costs and
expenses of Lender’s internal legal counsel, or in lieu thereof, a flat charge,
which may be expressed as a “documentation fee”),   whether any suit is brought
or not and whether incurred at trial or on appeal; (e) any civil penalty or fine
assessed by OFAC against Lender or any Lender Affiliate and all costs and
expenses (including, without limitation, attorneys’ fees) incurred in connection
with defense thereof by Lender or such Lender Affiliate, as a result of Lender’s
making extensions of credit hereunder, the acceptance of payments due under the
Loan Documents or any Hedge Agreement between any Obligor and Lender or any
Lender Affiliates, acceptance of Collateral, or providing of any Bank Product;
(f) any matter relating to the financing transactions contemplated by the Loan
Documents or by any document executed in connection with the transactions
contemplated thereby, other than for such loss, damage, liability, obligation,
penalty, fee, cost or expense arising from such indemnitee’s gross negligence or
willful misconduct; (g) any liability for payment of any state documentary stamp
taxes, intangible taxes, or similar taxes (including interest or penalties, if
any) which may now or hereafter be determined to be payable in respect to the
execution, delivery, or recording of any Loan Document or the making of any
Loan, whether originally thought to be due or not, and regardless of any mistake
of fact or law on the part of Lender (or its counsel) or any Obligor, any
Guarantor, or any of their Subsidiaries with respect to the applicability of
such tax; and (h) any payment made by Lender or any Lender Affiliates with
respect to any taxes or other amount payable by any Obligor, any Guarantor, or
any of their Subsidiaries required to be paid by the terms of this Agreement or
any other Loan Agreement and which may be reasonably necessary to protect or
preserve any Collateral or the applicable Credit Party’s or Lender’s interests
therein.  Obligors’ obligation for indemnification and reimbursement for all of
the foregoing losses, damages, liabilities, obligations, penalties, fees, costs,
and expenses of Lender or any Lender Affiliates shall be part of the
Obligations, shall be secured by the Collateral, shall be due and payable by
Obligors on demand, and shall be chargeable against Obligors’ loan account in
the manner provided in Section 2.4(a) or Section 2.8(b) (provided, however, that
Lender shall  have no obligation to charge such amounts in such manner), and
shall survive termination of this Agreement.
 
 
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10.4 Notices.  Any notice or other communication hereunder or under any other
Loan Document to any party hereto or thereto shall be by hand delivery,
overnight delivery via nationally recognized overnight delivery service,
facsimile with receipt confirmed, or registered or certified United States mail
with return receipt and unless otherwise provided herein shall be deemed to have
been given or made when delivered, telegraphed, faxed or, if sent via United
States mail, when receipt thereof is signed by the receiver, postage prepaid,
addressed to the party at its address specified below (or at any other address
that the party may hereafter specify to the other parties in writing):
 

  Lender:
Regions Bank
1180 West Peachtree St. NW
Suite 1000
Atlanta, GA 30309
Attn: Loan Administration
Fax: 404-221-4361
        Obligors: ENGlobal Corporation, as Borrower Agent
654 N. Sam Houston Parkway E.
Suite 400
Hoston, TX 77060
Attn: Chief Financial Officer
Fax: 281-754-4859

10.5 Governing Law.  This Agreement and the other Loan Documents shall be deemed
contracts made under the laws of the Jurisdiction and shall be governed by and
construed in accordance with the laws of the Jurisdiction (excluding its
conflict of laws provisions if such provisions would require application of the
laws of another jurisdiction) except insofar as (a) the laws of another
jurisdiction may, by reason of mandatory provisions of law, govern the
perfection, priority, or enforcement of security interests in the Collateral or
(b) the terms of such Loan Document expressly state that the law of a different
jurisdiction shall govern.
 
 
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10.6 Successors and Assigns, No Third Party Beneficiaries, Obligors as
Agents.  This Agreement and each other Loan Document shall be binding upon and
shall inure to the benefit of Lender and each Credit Party which is a party
hereto and thereto, and their respective successors and assigns; provided,
however, that neither any Obligor nor any Credit Party may  assign any of its
rights hereunder or under any other Loan Document without the prior written
consent of Lender, and any such assignment made without such consent will be
void in all respects; provided, further, however, that Lender may assign its
rights hereunder and under the other Loan Documents in accordance with Section
10.11. Neither this Agreement nor any other Loan Document is intended or shall
be construed to confer any rights or benefits upon any Person other than the
parties hereto and thereto. In respect of this Agreement and each other Loan
Document, each Obligor certifies that it has the right, power and authority to
act as agent for its Subsidiaries and bind each of them accordingly hereto and
thereto.
 
10.7 Counterparts; Telecopied Signatures; Seals.  This Agreement and any
amendments, waivers and consents relating hereto, together with each of the Loan
Documents,  and any amendments, waivers or consents relating thereto, may be
executed in any number of counterparts and by different parties hereto or
thereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original and all of which when taken together shall
constitute but one and the same instrument.  Any signature delivered by a party
hereto or to any amendment, waiver, or consent relating hereto or to any Loan
Document by facsimile transmission or by electronic e-mail in Adobe
Corporation’s Portable Document Format (or PDF) shall be deemed to be an
“original” signature hereto or thereto.
 
10.8 No Usury.  Regardless of any other provision of this Agreement, any Note,
or in any other Loan Document, if for any reason the effective rate of interest
payable hereunder or thereunder should exceed the maximum lawful rate of
interest, the effective rate of interest shall be deemed reduced to, and shall
be, such maximum lawful rate of interest.  Any amount paid or collected by
Lender as interest which would be in excess of the amount permitted by
applicable law shall be deemed applied to the reduction of the principal balance
of the Obligations and not to the payment of interest, but if such Obligations
have been or are thereby paid in full, the excess shall be returned to the
Person paying same, such application to the principal balance of the Obligations
or the refunding of excess to be a complete settlement and acquittance thereof.
 
10.9 Powers.  All powers of attorney granted to Lender hereunder or under any
other Loan Document are coupled with an interest and are irrevocable whether or
not expressly so provided in the granting thereof.
 
10.10 Approvals; Amendments.  If this Agreement or any other Loan Document calls
for Lender’s approval or consent, such approval or consent may be given or
withheld in the discretion of Lender unless otherwise specified herein.  This
Agreement and the other Loan Documents may not be modified, altered, or amended,
except by an agreement in writing signed by each Obligor (or Borrower Agent on
behalf of each Obligor or Obligors, collectively)  and Lender and may not be
modified in any manner adverse to a counterparty to any secured or guaranteed
Hedge Agreement between any Obligor and Lender or any Lender Affiliate without
that provider’s prior written consent.
 
 
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10.11 Participations and Assignments.  Lender shall have the right to enter into
one or more participations with other banks or financial institutions with
respect to the Obligations at any time or from time to time. Lender shall have
the further right to assign to one or more Eligible Assignees all or a portion
of its interests, rights, titles and obligations hereunder and under the other
Loan Documents.  Upon prior notice to Borrower Agent of any such participation
or assignment, Borrower Agent shall thereafter furnish such participant or
Eligible Assignee with any information furnished by Borrower Agent  to Lender
pursuant to the terms of the Loan Documents.  Nothing in this Agreement or any
other Loan Document shall prohibit Lender from pledging or assigning its
interests, rights, titles and obligations under this Agreement and under any of
the other Loan Documents, including any Collateral, to any Federal Reserve Bank
in accordance with applicable law.
 
10.12 Borrowing Agency Provisions.  So long as there are multiple Obligors, the
following terms and conditions shall apply:
 
(a) Single Business Purpose. Each Obligor acknowledges that it, together with
each other Obligor, make up a related organization of various Companies
constituting a single economic and business enterprise and sharing a substantial
identity of interests such that, without limitation, Obligors render services to
or for the benefit of each other, purchase or sell and supply goods to or from
or for the benefit of each other, make loans, advances and provide other
financial accommodations to or for the benefit of each other (including the
payment of creditors and guarantees of Indebtedness), provide administrative,
marketing, payroll and management services to or for the benefit of each other;
have centralized accounting, common officers and directors; and are in certain
circumstances are identified to creditors as a single economic and business
enterprise.  Accordingly, and without limitation, any credit or other financial
accommodation extended to any one Borrower  pursuant hereto will result in
direct and substantial economic benefit to each other Obligor, and each Obligor
will likewise benefit from the economies of scale associated with the Obligors,
as a group, applying for credit or other financial accommodations pursuant
hereto on a collective basis.
 
(b) Borrower Agent. Each Obligor hereby irrevocably designates Borrower Agent to
be its attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Obligor or
Obligors, collectively, and hereby authorizes Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing
Representative.
 
(c) Indemnity. The handling of this credit facility as a co-borrowing facility
with a Borrower Agent in the manner set forth in this Agreement is solely as an
accommodation to Obligors and at their request.  Lender shall incur no liability
to any Obligor as a result thereof.  To induce Lender to do so and in
consideration thereof, each Obligor hereby indemnifies Lender and holds
Lender  harmless from and against any and all liabilities, expenses, losses,
damages and claims of damage or injury asserted against Lender  by any Person
arising from or incurred by reason of the handling of the financing arrangements
of Obligors as provided herein, reliance by Lender  on any request or
instruction from Borrower Agent or any other action taken by Lender with respect
to this Section except due to willful misconduct or gross (not mere) negligence
by the indemnified party.
 
 
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(d) Joint and Several. All Obligations shall be joint and several, and each
Obligor shall make payment upon the maturity of the Obligations, whether by
acceleration or otherwise, and such obligation and liability on the part of each
Obligor shall in no way be affected by any extensions, renewals and forbearance
granted by Lender to any Obligor, failure of Lender to give any Obligor notice
of borrowing or any other notice, any failure of Lender to pursue or preserve
its rights against any Obligor, the release by Lender of any Collateral now or
thereafter acquired from any Obligor, and such agreement by each Obligor to pay
upon any notice issued pursuant thereto is unconditional and unaffected by prior
recourse by Lender to the other Obligors or any Collateral for such Obligor’s
Obligations or the lack thereof.
 
(e) Subrogation Waiver. Each Obligor expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which such Obligor may now or hereafter have against the other Obligors or
other Person directly or contingently liable for the Obligations hereunder, or
against or with respect to the other Obligors’ property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until termination of this
Agreement and repayment in full of the Obligations.
 
10.13 Waiver of Certain Defenses.  To the fullest extent permitted by applicable
law, upon the occurrence of any Event of Default, and during its continuation,
neither any  Obligor nor any Subsidiary nor anyone claiming by or under such
Obligor or any such Subsidiary will claim or seek to take advantage of any law
requiring Lender to attempt to realize upon any Collateral or collateral of any
Guarantor, or any appraisement, evaluation, stay, extension, homestead,
redemption, or exemption laws now or hereafter in force to prevent or hinder the
enforcement of this Agreement or any other Loan Document.   Each Obligor, for
itself and  each Subsidiary and all other Persons who may at any time claim
through or under such Obligor or any such Subsidiary  hereby expressly waives to
the fullest extent permitted by applicable law the benefit of all such
laws.  All rights of Lender and all obligations of each Obligor and its
Subsidiaries hereunder shall be absolute and unconditional irrespective of (a)
any change in the time, manner, or place of payment of, or any other term of,
all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from any provision of the Loan Documents, (b) any
exchange, release, or non-perfection of any other collateral given as security
for the Obligations, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Obligations, or (c) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, an Obligor, any Subsidiary or any third party, other than payment
and performance in full of the Obligations.
 
 
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10.14 Additional Provisions.  Time is of the essence of this Agreement and the
other Loan Documents.  No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of any
party hereto by reason of such party having or being deemed to have structured,
drafted or dictated such provision.
 
10.15 Integration; Final Agreement.  This Agreement and the other Loan
Documents, together with all other instruments, agreements, and certificates
executed by the parties in connection therewith or with reference thereto,
embody the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings and inducements, whether express or implied,
oral or written.  There are no unwritten oral agreements between the parties.
 
10.16 LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES.  EACH OF THE PARTIES
HERETO, INCLUDING LENDER BY ITS ACCEPTANCE HEREOF, AGREES THAT, IN ANY JUDICIAL,
MEDIATION, OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR
AMONG THEM   THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS
AGREEMENT, THE LOAN DOCUMENTS, OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR
AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO (A “DISPUTE”),
IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (a)
INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES OR (b) PUNITIVE OR EXEMPLARY
DAMAGES.  EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM
TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE
IN CONNECTION WITH ANY DISPUTE, REGARDLESS OF WHETHER THE DISPUTE IS RESOLVED BY
ARBITRATION, MEDIATION, JUDICIALLY, OR OTHERWISE.
 
10.17 WAIVER OF JURY TRIAL.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OBLIGOR  FOR ITSELF AND ON BEHALF OF EACH SUBSIDIARY,  BY ITS EXECUTION
HEREOF,  AND LENDER, BY ITS ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO.  THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO ENTER INTO AND
ACCEPT THIS AGREEMENT. EACH OF THE PARTIES AGREES THAT THE TERMS HEREOF SHALL
SUPERSEDE AND REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF DISPUTES
BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR
AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO OR BEING REPLACED,
SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS AGREEMENT.
 
 
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10.18 Submission to Jurisdiction; Venue.
 
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS IN DALLAS
COUNTY, TEXAS  OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OBLIGOR  IRREVOCABLY ACCEPTS
FOR ITSELF AND EACH SUBSIDIARY AND IN RESPECT OF ITS AND EACH SUBSIDIARY’S
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF SUCH
COURTS, AND AGREES TO BE BOUND BY THE OTHER PROVISIONS SET FORTH IN THIS SECTION
10.18.  EACH OBLIGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
IT AT THE ADDRESS SET OUT FOR NOTICES PURSUANT TO SECTION 10.4, SUCH SERVICE TO
BECOME EFFECTIVE FIVE (5)  BUSINESS DAYS AFTER SUCH MAILING.  NOTHING HEREIN
SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR TO OTHERWISE PROCEED AGAINST ANY
OBLIGOR OR ANY OTHER CREDIT PARTY IN ANY OTHER JURISDICTION.
 
(b) EACH OBLIGOR FOR ITSELF AND EACH SUBSIDIARY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT OR SUCH SUBSIDIARY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS
REFERRED TO IN SUBSECTION (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES FOR ITSELF AND EACH SUBSIDIARY NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
 
10.19 Credit Inquiries.   Each Obligor, for itself and on behalf of each
Subsidiary,   hereby authorizes and permits Lender, at its discretion and
without any obligation to do so, to respond to credit inquiries from third
parties concerning such Obligor or any of its Subsidiaries.
 
10.20 Information.  Nothing in this Agreement shall prevent Lender from
disclosing confidential information provided by any Credit Party from time to
time (a) to any Lender Affiliate or any of Lender’s or any Lender Affiliate’s
officers, directors, employees, agents, or advisors, (b) to any other Person if
reasonably incidental to the administration of the agreements made herein, (c)
as required by any law, rule, or regulation, (d) upon the order, request or
demand of any Governmental Entity; (e) that is or becomes available to the
public or that is or becomes available to Lender other than as a result of a
disclosure by Lender prohibited by this Agreement, (f) in connection with any
litigation to which Lender or any of Lender  Affiliates may be a party, whether
to defend itself, reduce its liability, protect or exercise any of its claims,
rights, remedies or interests under or in connection with the Loan Documents or
any Hedge Agreements, or otherwise, (g) to the extent necessary in connection
with the exercise of any right or remedy under this Agreement or any other Loan
Document, and (h) to any actual or proposed participant or assignee.  Each
Obligor, for itself and each Subsidiary, hereby authorizes Lender to use such
Obligor’s and/or such Subsidiary’s name, trade name, logos and other insignia
and the type, amount and purpose of any credit facility  provided hereunder in
any “tombstone” or comparable advertising, on its website or in other of
Lender’s marketing materials.
 
 
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10.21 No Tax Advice.  Each Obligor hereby acknowledges and agrees that, with
respect to all tax and accounting matters relating to this Agreement, the other
Loan Documents, or the transactions contemplated herein and therein, it has not
relied on any representations made, consultation provided by, or advice given or
rendered by Lender or Lender’s representatives, agents, or employees, and,
instead, each Obligor has sought, and relied upon, the advice of its own tax and
accounting professionals with respect to all such matters.
 
10.22 No Advisory or Fiduciary Responsibility.  In connection with all aspects
of each transaction contemplated hereby and by any Loan Document, each Obligor
acknowledges and agrees that (a) (i) the credit facility evidenced by this
Agreement and any related arranging or other services by Lender,  any of the
Lender Affiliates, or any arranger are arm's-length commercial transactions
between such Obligor and such Persons; (ii) each Obligor has consulted its own
legal, accounting, regulatory, and tax advisors to the extent Obligor has deemed
appropriate; and (iii) each Obligor is capable of evaluating and understanding,
and understands and accepts, the terms, risks, and conditions of the
transactions contemplated by this Agreement and the other Loan Documents; (b)
Lender, any Lender Affiliates, and any arranger is and has been acting solely as
a principal in connection with this credit facility, is not the financial
advisor, agent, or fiduciary of, to, or for each Obligor or any Credit Party or
any other Person and has no obligation with respect to the transactions
contemplated by this Agreement and the other Loan Documents except as expressly
set forth herein or therein; and (c) Lender, any Lender Affiliates, and any
arranger may be engaged in a broad range of transactions that involve interests
that differ from the Credit Parties and their Affiliates and have no obligation
to disclose any of such interests to any Credit Party or any such Affiliate.  To
the fullest extent permitted by applicable law, each Obligor for itself and
on  behalf of each Subsidiary hereby waives and releases any claims that it may
have against Lender, any Lender Affiliate, and any arranger with respect to any
breach or alleged breach of agency or fiduciary duty in connection with any
aspect of any transaction contemplated by this Agreement or any other Loan
Document.
 
 
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10.23 WAIVER IN REGARD TO DECEPTIVE TRADE PRACTICES ACT;  NON-APPLICABILITY OF
CHAPTER 346.  EACH  OBLIGOR HEREBY WAIVES ANY RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES CONSUMER PROTECTION ACT SECTION 17.41 ET SEQ.  OF THE TEXAS BUSINESS &
COMMERCE CODE,  A LAW THAT GIVES  CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. EACH
OBLIGOR FURTHER EXPRESSLY REPRESENTS AND WARRANTS THAT IT IS NOT IN A
SIGNICANTLY DISPARATE BARAGINING POSITION RELATIVE TO LENDER, AND HAS BEEN
REPRESNTED BY LEGAL COUNSEL OF ITS OWN SELECTION IN CONNECTION WITH THE MAKING
OF THIS WAIVER AND FOR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
OBLIGOR FURTHER AGREES THAT EXCEPT FOR THE OPT-OUT PROVISIONS OF SECTION 346.004
THEREOF, THE PROVISIONS OF CHAPTER 346 OF THE TEXAS FINANCE CODE, AS AMENDNED
FROM TIME TO TIME (REGULATING  CERTAIN REVOLVING CREDIT LOANS AND REVOLVING
TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS.
 

[Signatures on following pages.]
 
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed  as of the day and year first above written.
 
 
 

 
OBLIGORS:
 
ENGLOBAL CORPORATION
 
 
 
 
  By:
/s/Mark Hess
        Name: Mark Hess         Title:
Treasurer and Chief Financial Officer
 
 
 
 
   
ENGLOBAL U.S., INC.
 
 
 
 
    By:
/s/Mark Hess
        Name:
Mark Hess
        Title:
Treasurer and Chief Financial Officer
 
 
 
 
   
ENGLOBAL GOVERNMENT SERVICES, INC.
 
 
 
 
    By:
/s/Mark Hess
        Name: Mark Hess         Title: Treasurer and Chief Financial Officer

 

 
 

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GUARANTORS:
 
 
 
 
ENGLOBAL INTERNATIONAL, INC.
 
 
  By:
/s/Mark Hess
        Name: Mark Hess         Title:
Treasurer and Chief Financial Officer
 
 
 
 
 
 
   
ENGLOBAL EMERGING MARKETS, INC.
 
 
    By:
/s/Mark Hess
        Name:
Mark Hess
        Title:
Treasurer and Chief Financial Officer

 
 
 

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LENDER:

REGIONS BANK
 
 
 
 
 
  By:
/s/Gregory Garbuz
        Name:
Gregory Garbuz
        Title:
Vice President

                                                      
 
 
 
 

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