Exhibit 10.1

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated
as of May 29, 2016 (the “Amendment Date”), is made 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 (“Lender”), for the purpose of amending that certain Loan and
Security Agreement, dated as of September 16, 2014, made between Obligors and
Lender (which, as modified or amended to date, and as further modified and
amended hereby, is called herein the “Loan Agreement”) to memorialize the
consent of Lender to certain transactions contemplated by Borrowers, the making
of certain amendments and modifications to the Loan Agreement as a condition
thereto, and certain related matters, all as described more particularly below.

 

1.                  Incorporation of Definitions. Capitalized terms used in this
Amendment, but not expressly defined herein, shall have the same meanings as
given to such terms in the Loan Agreement. Section references used in this
Amendment shall mean and refer to Sections references in the Loan Agreement.

 

2.                  Amendments. Lender and Obligors agree that the Loan
Agreement shall be amended and modified, effective as of the Second Amendment
Effective Date (as defined hereinbelow) , as follows:

 

2.1                    New Definitions. The following new defined terms shall be
added to Section 1.2 of the Loan Agreement in the appropriate alphabetical
order:

 

“Second Amendment” means the Second Amendment to Loan and Security Agreement,
dated as of the Second Amendment Effective Date, made between the parties
hereto, amending this Agreement.

 

“Second Amendment Effective Date” means the “Amendment Date,” as that term is
defined in the Second Amendment.

 

2.2                    Financial Covenant Change. Section 8.2(a) of the Loan
Agreement is amended by adding thereto, at the end thereof, the following:

 

 

 

Notwithstanding the foregoing, however, commencing with the Fiscal Month ending
April 30, 2016, and continuing through and including the Fiscal Month ending
December 31, 2016 only, compliance with the foregoing Fixed Charge Coverage
Ratio financial covenant shall be suspended and beginning not later than the
Second Amendment Effective Date, and continuing at all times thereafter through
December 31, 2016, Borrowers shall be required, in lieu thereof, to meet the
following conditions: (1) to reduce all Working Capital Obligations outstanding
to zero (0), and thereafter maintain all Working Capital Obligations at zero
(0), except (a) as may be necessary to accommodate for intraday cash management
activities, and (b) for up to $500,000, in aggregate amount, of Letter of Credit
Obligations outstanding at any one time, and (2) to maintain with Lender
unrestricted cash in a Collections Account equal to not less than $5,000,000.
Commencing on January 1, 2017, and continuing at all times thereafter,
compliance with the foregoing Fixed Charge Coverage Ratio financial covenant
shall be restored, and Borrowers shall be obliged to comply at all times
therewith.

 

3.                  Conditions Precedent. Completion of the following to
Lender’s satisfaction shall constitute express conditions precedent to the
effectiveness of the consent set forth in Section 2 above and the amendments set
forth in Section 2 above: (i) the Obligors party hereto and thereto shall have
executed and delivered to Lender this Amendment and the consent and
re-affirmation of the Subsidiary Guarantors attached hereto (this Amendment and
such consent and re-affirmation, collectively, the “Amendment Documents”); (ii)
all representations and warranties set forth in Section 4 below shall be true
and correct in all material respects as of the Amendment Date and after giving
effect hereto and thereto, in each instance, as witnessed by Obligors’ execution
and delivery hereof and thereof to the extent party hereto and thereto; and
(iii) Borrowers shall have paid to Lender an amendment fee of $20,000, in cash,
which shall be paid by Borrowers on the Second Amendment Effective Date, shall
be fully earned by Lender on such date and shall not be refundable in whole or
in part after payment in any event.

 

4.                  Representations and Warranties. In order to induce Lender to
enter into this Amendment, each Obligor hereby represents and warrants to Lender
as follows:

 

4.1                    Legal Right. Each Obligor has the full power, right and
legal authority to execute, deliver and perform its obligations under this
Amendment and each other Amendment Document to which it is party.

 

4.2                    Authorization; No Consents. Each Obligor has taken all
action necessary to authorize the execution and delivery of, and the performance
of its obligations under, this Amendment and any other Amendment Documents to
which it is party; and no consent or approval of any Person, or registration or
filing with any Governmental Entity, is required in connection herewith, except
such as has been obtained or made and is in full force and effect.

 

4.3                    Enforceability. This Amendment together with the other
Amendment Documents to which such Obligor is party constitute a legal, valid and
binding obligations of each Obligor, enforceable against Obligor in accordance
with their respective terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization or moratorium or similar laws affecting the rights of
creditors generally.

 

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4.4                    No Default. After giving effect hereto, no Default or
Event of Default has occurred and is continuing or would result from the
execution, delivery and performance by each Obligor of this Amendment or any
other Amendment Documents to which it is party.

 

4.5                    Existing Representations. The representations and
warranties contained in the Loan Agreement and in each of the other Loan
Documents to which each Obligor is a party are true and complete in all material
respects on and as of the date hereof as though made on and as of the date
hereof except for (i) changes which have occurred and which were not prohibited
by the terms of the Loan Agreement or such other Loan Documents, or otherwise
consented to in writing by Lender, including pursuant hereto, (ii) to the extent
that any such representation or warranty related to an earlier date, and (iii)
as are affected by transactions specifically and expressly contemplated by the
Loan Agreement.

 

5.                  Reference to and Effect on the Documents.

 

5.1                    References. Each reference in the Loan Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each
reference to the Loan Agreement in the other Loan Documents other than the Loan
Agreement, shall mean and be a reference to the Loan Agreement as amended
hereby.

 

5.2                    Effect. Except as specifically amended hereby, the Loan
Agreement and all other Loan Documents, and all other documents, agreements,
instruments or writings entered into in connection therewith, shall remain in
full force and effect, and are hereby ratified, confirmed and acknowledged by
Obligors. The consents set forth herein are limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or other
modification of any other term or conditions of the Loan Agreement, any other
Loan Document, or any document delivered pursuant thereto, or (ii) prejudice any
right or rights which Lender may now or in the future have in connection with
the Loan Agreement or any other Loan Document, or (iii) constitute a novation of
the Loan Agreement or any other Loan Document.

 

6.                  Governing Law. This Amendment together with the other
Amendment Documents (if any) and the rights and obligations of the parties
hereunder and thereunder, respectively, shall be governed by, and construed and
interpreted in accordance with the substantive laws of the Jurisdiction, without
regard to its conflict of laws principles.

 

7.                  Headings. Section headings and captions used in this
Amendment and the other Amendment Documents (if any) are included herein for
convenience of reference only and shall not constitute a part of this Amendment
or any other Amendment Document for any other purpose.

 

8.                  Successors. This Amendment and each of the other Amendment
Documents (if any) shall be binding upon the permitted successors and assigns of
the parties hereto and thereto.

 

9.                  Counterparts. This Amendment and each of the other Amendment
Documents (if any) may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any party
hereto may execute this Amendment and the other Amendment Documents by signing
any such counterpart. Delivery by any party hereto of an executed counterpart of
a signature page to this Amendment or any Amendment Document by telecopy, Adobe
PDF file or other form of electronic transmission shall be effective as delivery
of a manually executed counterpart thereof, and shall be effective as an
original thereof, provided that any party hereto making delivery by such means
shall also deliver an original executed counterpart to Lender, but the failure
of such party to do so shall not affect the validity, binding effect or
enforceability of this Amendment.

 

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10.              Loan Document. Each of this Amendment and all other Amendment
Documents (if any) shall constitute Loan Documents under the Loan Agreement and
be governed and construed accordingly.

 

11.              No Offsets. Each Obligor hereby acknowledges and agrees that as
of the Amendment Effective Date it has no known offsets, defenses, claims, or
counterclaims against Lender with respect to the Obligations.

 

12.              Entire Agreement. This Amendment and the other Amendment
Documents, together, constitute the entire agreement between the parties in
respect of the subject matter hereof, and may not be contradicted by evidence of
prior, contemporaneous or oral agreements between the parties. There are no
unwritten oral agreements between Obligors and Lender in regard to the subject
matter hereof.

 

 

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WITNESS the hands of Borrowers and Lender as of the date first above written.

 

 

    “BORROWERS”           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                  

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

CONSENT AND REAFFIRMATION OF GUARANTORS

 

 

The undersigned, being a Subsidiary Guarantor, as defined in the Loan and
Security Agreement being amended pursuant to the within and foregoing Second
Amendment to Loan and Security Agreement, does hereby acknowledge receipt of
said amendment, consents thereto, agrees to be bound thereby and further agrees
in connection therewith that its, his or her Guaranty, as defined in such Loan
and Security Agreement, shall continue in full force and effect notwithstanding
the execution and delivery thereof and the performance of the parties
thereunder.

 

 

    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