Exhibit 10.1

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as
of April 1, 2013, by and between WILLDAN GROUP, INC., a Delaware corporation
(“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

A.                                    Borrower is currently indebted to Bank
pursuant to the terms and conditions of that certain Credit Agreement between
Borrower and Bank dated as of January 1, 2012, as amended from time to time
(“Credit Agreement”).

 

B.                                    Pursuant to the Credit Agreement, Borrower
remains indebted to Bank under a line of credit in the maximum principal amount
of Five Million Dollars ($5,000,000.00) (the “Prior Line of Credit”), which is
evidenced by that certain Revolving Line of Credit Note dated January 1, 2012,
as modified from time to time (the “Prior Line of Credit Note”).  The Prior Line
of Credit Note matures and becomes due and payable in full on April 1, 2013 and
as of the date hereof, the outstanding principal balance under the Prior Line of
Credit is $3,000,000.00, plus accrued but unpaid interest.

 

C.                                    Borrower is currently in default under the
terms of the Credit Agreement for the following financial covenant violations;
(i) failure to meet the net income after taxes requirement in Section 4.9 (a) of
the Credit Agreement on June 29, 2012, September 28, 2012, December 31, 2012 and
March 29, 2013; and (ii) failure to meet the Total Funded Debt to EBITDA
requirement in Section 4.9 (b) of the Credit Agreement on June 29, 2012,
September 28, 2012, December 31, 2012 and March 29, 2013 (collectively, the
“Existing Defaults”).

 

D.                                    Borrower has requested that Bank
restructure the Prior Line of Credit and waive the Existing Defaults, and Bank
has agreed to the foregoing, subject to the terms and conditions contained
herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, subject to the terms and conditions described herein,
the parties hereto agree that the Credit Agreement shall be amended as follows;
provided, however, that nothing shall terminate any security interests,
guaranties, or other documents in favor of Bank, all of which shall remain in
full force and effect unless expressly amended hereby:

 

1.                                      Amendment to Sections 1.1 (a) & (b). 
Sections 1.1 (a) & (b) of the Credit Agreement are hereby deleted in their
entirety, and the following substituted therefor:

 

“(a)                                      Line of Credit.  Subject to the terms
and conditions of this Agreement, Bank hereby agrees to make advances to
Borrower from time to time up to and including April 1, 2014, not to exceed at
any time the aggregate principal amount of Five Million Dollars ($5,000,000.00)
(“Line of Credit”), the proceeds of which shall be used first, to refinance
Borrower’s Prior Line of Credit with Bank, and second, to finance Borrower’s
working capital requirements.  Borrower’s obligation to repay advances under the
Line of Credit shall be evidenced by a promissory note dated as of April 1, 2013
(“Line of Credit Note”), all terms of which are incorporated herein by this
reference.

 

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(b)                                            Letter of Credit Subfeature.  As
a subfeature under the Line of Credit, Bank agrees from time to time during the
term thereof to issue or cause an affiliate to issue standby letters of credit
for the account of Borrower (each, a “Letter of Credit” and collectively,
“Letters of Credit”); provided however, that the aggregate undrawn amount of all
outstanding Letters of Credit shall not at any time exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).  The form and substance of each Letter of Credit
shall be subject to approval by Bank, in its sole discretion.  Other than the
previously issued Letter of Credit dated September 10, 2009 which expires on
June 30, 2016, no Letter of Credit shall have an expiration date subsequent to
the maturity date of the Line of Credit.  The undrawn amount of all Letters of
Credit shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder.  Each Letter of Credit shall be subject to the additional
terms and conditions of the Letter of Credit agreements, applications and any
related documents required by Bank in connection with the issuance thereof. 
Each drawing paid under a Letter of Credit shall be deemed an advance under the
Line of Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however, that
if advances under the Line of Credit are not available, for any reason, at the
time any drawing is paid, then Borrower shall immediately pay to Bank the full
amount drawn, together with interest thereon from the date such drawing is paid
to the date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit.  In such event Borrower agrees
that Bank, in its sole discretion, may debit any account maintained by Borrower
with Bank for the amount of any such drawing.”

 

2.                                      Amendment to Section 1.2 (a). 
Section 1.2 (a) of the Credit Agreement is hereby deleted in its entirety, and
the following substituted therefor:

 

“(a)                                      Interest.  The outstanding principal
balance of each credit subject hereto shall bear interest at the rate of
interest set forth in each promissory note or other instrument or document
executed in connection therewith.”

 

3.                                      Amendment to Section 1.4.  Section 1.4
of the Credit Agreement is hereby deleted in its entirety, and the following
substituted therefor:

 

“SECTION 1.4.                       COLLATERAL.

 

As security for all indebtedness and other obligations of Borrower to Bank,
Borrower hereby grants to Bank security interests of first priority in all
Borrower’s accounts receivable and other rights to payment, general intangibles,
inventory and equipment.

 

As security for all indebtedness and other obligations of Borrower to Bank,
Borrower hereby grants to Bank a security interest in all funds, including both
principal and interest, deposited to Borrower’s Demand Deposit Account
#4968099630.

 

As security for all indebtedness and other obligations of Borrower to Bank,
Borrower shall cause Willdan Financial Services, Willdan Engineering, Willdan
Homeland Solutions and any other Subsidiary to grant to Bank security interests
of first priority in all accounts receivable and other rights to payment,
general intangibles, inventory and equipment.

 

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All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds or mortgages, and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank.  Borrower shall pay to Bank immediately upon demand the
full amount of all charges, costs and expenses (to include fees paid to third
parties and all allocated costs of Bank personnel), expended or incurred by Bank
in connection with any of the foregoing security, including without limitation,
filing and recording fees and costs of appraisals, audits and title insurance.”

 

4.                                                 Amendment to Section 2.5. 
Section 2.5 of the Credit Agreement is hereby amended by deleting “December 31,
2010” as the date of Borrower’s most current annual financial statement
delivered to Bank, and by substituting “December 31, 2012” for said date.

 

5.                                                  Amendment to Section 3.1
(b).  Section 3.1 (b) of the Credit Agreement is hereby deleted in its entirety,
and the following substituted therefor:

 

“(b)                                      Documentation.  Bank shall have
received, in form and substance satisfactory to Bank, each of the following,
duly executed:

 

(i)                                 This Agreement and each promissory note or
other instrument or document required hereby.

(ii)                              Corporate Resolution: Borrowing.

(iii)                           Corporate Resolution: Continuing Guaranty (4).

(iv)                          Corporate Resolution: Third Party Collateral (3).

(v)                             Certificate of Incumbency (5).

(vi)                          Continuing Guaranty from each guarantor listed in
Section 1.5 hereof.

(vii)                       Continuing Security Agreement: Rights to Payments
and Inventory.

(viii)                    Security Agreement: Equipment.

(ix)                          Third Party Security Agreement: Rights to Payments
and Inventory (3).

(x)                             Third Party Security Agreement: Equipment (3).

(xi)                          Such other documents as Bank may require under any
other Section of this Agreement.”

 

6.                                                  Amendment to Section 4.3. 
Section 4.3 of the Credit Agreement is hereby deleted in its entirety, and the
following substituted therefor:

 

“SECTION 4.3.                       FINANCIAL STATEMENTS.  Provide to Bank all
of the following, in form and detail satisfactory to Bank:

 

(a)                                         not later than 30 days after and as
of the end of each month, a financial statement of Borrower, prepared by
Borrower, to include balance sheet, income statement and statement of cash flow;

 

(b)                                            not later than 30 days after and
as of the end of each month, copies of Borrower’s current brokerage statements;

 

(c)                                             not later than the last day of
each month end, a list of the names of all Borrower’s and Subsidiary’s bankrupt
and distressed account debtors;

 

(d)                                            not later than each January 1,
Borrower’s annual financial projections, in a format acceptable to Bank, to
include balance sheet, income statement and statement of cash flow;

 

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(e)                                             not later than 100 days after
and as of the end of each fiscal year, a copy of Borrower’s 10-K report as filed
with the Securities and Exchange Commission;

 

(f)                                              not later than 50 days after
and as of the end of each fiscal quarter, a copy of Borrower’s 10-Q report as
filed with the Securities and Exchange Commission;

 

(g)                                             from time to time such other
information as Bank may reasonably request.”

 

7.                                                  Amendment to Section 4.9. 
Section 4.9 of the Credit Agreement is hereby deleted in its entirety, and the
following substituted therefor:

 

“SECTION 4.9.            FINANCIAL CONDITION.  Maintain Borrower’s financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):

 

(a)                                 Tangible Net Worth not less than
$15,500,000.00 on June 30, 2013, $16,500,000.00 on September 30, 2013 and
$17,500,500.00 on December 31, 2013 and anytime thereafter, with “Tangible Net
Worth” defined as the aggregate of total stockholders’ equity less any
intangible assets and less any loans or advances to, or investments in, any
related entities or individuals.”

 

8.                                                  Amendment to Section 7.2. 
Section 7.2 is hereby amended by deleting the reference to “Greater Los Angeles
East Regional Commercial Banking Office, 1000 Lakes Drive, 2nd Floor, West
Covina, CA 91790” as Bank’s address, and by substituting in its place “333 South
Grand Avenue, 9th Floor, Los Angeles, CA 90071-1504.”

 

9.                                                  Restructuring Fee.  In
consideration of the changes set forth herein and as a condition to the
effectiveness hereof, immediately upon signing this Amendment Borrower shall pay
to Bank a non-refundable fee of $25,000.00 (the “Restructuring Fee”).

 

10.                                           Conditions Precedent.  The
obligation of Bank to amend the terms and

 

conditions of the Credit Agreement as provided herein, is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions by no
later than May 6, 2013:

 

(a)                                 Bank shall have received, in form and
substance satisfactory to Bank, each of

 

the following, duly executed:

 

(i)                                     This Amendment.

(ii)                                  The Line of Credit Note.

(iii)                               Billing Invoice.

(iv)                              Corporate Resolution: Continuing Guaranty (3).

(v)                                 Certificate of Incumbency (3).

(vi)                              Immediately Restricted Wells Fargo Bank,
National Association Deposit Account.

(vii)                           Guarantors’ Consent, Reaffirmation and General
Release attached hereto.

(viii)                        Such other documents as Bank may require under any
other section of this Amendment.

 

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(b)                                 Restructuring Fee.  Bank shall have received
the Restructuring Fee in immediately available funds.

 

(c)                                  Other Fees and Costs.  In addition to
Borrower’s obligations under the Credit Agreement and the other Loan Documents,
Borrower shall have paid to Bank the full amount of all costs and expenses,
including reasonable attorneys’ fees (including the allocated costs of Bank’s
in-house counsel) expended or incurred by Bank in connection with the
negotiation and preparation of this Amendment, for which Bank has made demand.

 

(d)                                 Interest.  Interest under the Prior Line of
Credit Note shall have been paid current.

 

11.                               General Release.  In consideration of the
benefits provided to Borrower under the terms and provisions hereof, Borrower
and each guarantor hereunder hereby agree as follows (“General Release”):

 

(a)                                 Borrower and each guarantor hereunder, for
itself and on behalf of its respective successors and assigns, do hereby
release, acquit and forever discharge Bank, all of Bank’s predecessors in
interest, and all of Bank’s past and present officers, directors, attorneys,
affiliates, employees and agents, of and from any and all claims, demands,
obligations, liabilities, indebtedness, breaches of contract, breaches of duty
or of any relationship, acts, omissions, misfeasance, malfeasance, causes of
action, defenses, offsets, debts, sums of money, accounts, compensation,
contracts, controversies, promises, damages, costs, losses and expenses, of
every type, kind, nature, description or character, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, each as though fully set
forth herein at length (each, a “Released Claim” and collectively, the “Released
Claims”), that Borrower or any guarantor hereunder now has or may acquire as of
the later of:  (i) the date this Amendment becomes effective through the
satisfaction (or waiver by Bank) of all conditions hereto; or (ii) the date that
Borrower and each guarantor hereunder have executed and delivered this Amendment
to Bank (hereafter, the “Release Date”), including without limitation, those
Released Claims in any way arising out of, connected with or related to any and
all prior credit accommodations, if any, provided by Bank, or any of Bank’s
predecessors in interest, to Borrower or any guarantor hereunder, and any
agreements, notes or documents of any kind related thereto or the transactions
contemplated thereby or hereby, or any other agreement or document referred to
herein or therein.

 

(b)                                 Borrower and each guarantor hereunder hereby
acknowledge, represent and warrant to Bank as follows:

 

(i)                                     Borrower and such guarantor understand
the meaning and effect of Section 1542 of the California Civil Code which
provides:

 

“Section 1542.  GENERAL RELEASE; EXTENT.  A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

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(ii)                                  With regard to Section 1542 of the
California Civil Code, Borrower and each such guarantor agree to assume the risk
of any and all unknown, unanticipated or misunderstood defenses and Released
Claims which are released by the provisions of this General Release in favor of
Bank, and Borrower and each such guarantor hereby waive and release all rights
and benefits which they might otherwise have under Section 1542 of the
California Civil Code with regard to the release of such unknown, unanticipated
or misunderstood defenses and Released Claims.

 

(c)                                  Each person signing below on behalf of
Borrower or any guarantor hereunder acknowledges that he or she has read each of
the provisions of this General Release.  Each such person fully understands that
this General Release has important legal consequences, and each such person
realizes that they are releasing any and all Released Claims that Borrower or
any such guarantor may have as of the Release Date.  Borrower and each guarantor
hereunder hereby acknowledge that each of them has had an opportunity to obtain
a lawyer’s advice concerning the legal consequences of each of the provisions of
this General Release.

 

(d)                                 Borrower and each guarantor hereunder hereby
specifically acknowledge and agree that:  (i) none of the provisions of this
General Release shall be construed as or constitute an admission of any
liability on the part of Bank; (ii) the provisions of this General Release shall
constitute an absolute bar to any Released Claim of any kind, whether any such
Released Claim is based on contract, tort, warranty, mistake or any other
theory, whether legal, statutory or equitable; and (iii) any attempt to assert a
Released Claim barred by the provisions of this General Release shall subject
Borrower and each guarantor hereunder to the provisions of applicable law
setting forth the remedies for the bringing of groundless, frivolous or baseless
claims or causes of action.

 

12.                               Miscellaneous.  Except as specifically
provided herein, all terms and conditions of the Credit Agreement shall remain
in full force and effect, without waiver or modification.  All terms defined in
the Credit Agreement shall have the same meaning when used in this Amendment. 
This Amendment and the Credit Agreement shall be read together, as one
document.  This Amendment may be executed in any number of counterparts, each of
which when executed and delivered shall be deemed to be an original, and all of
which when taken together shall constitute one and the same Amendment.

 

13.                               Reaffirmation; Certification.  Borrower hereby
remakes all representations and warranties contained in the Credit Agreement and
reaffirms all covenants set forth therein.  Borrower further certifies that as
of the date of this Amendment, except as set forth above,  there exists no Event
of Default as defined in the Credit Agreement, nor any condition, act or event
which with the giving of notice or the passage of time or both would constitute
an Event of Default.

 

14.                               Waiver of Existing Defaults.  Bank hereby
waives its default rights with respect to the Existing Defaults.  This waiver
applies only to the Existing Defaults.  It is not a waiver for any subsequent
breach of the same provisions of the Credit Agreement, nor is it a waiver of any
breach of any other provision of the Credit Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the day and year first written above.

 

 

WELLS FARGO BANK,

WILLDAN GROUP, INC.

NATIONAL ASSOCIATION

 

 

 

 

By:

/s/ Kimberly D. Gant

 

By:

/s/ Razia Damji

 

Kimberly D. Gant

 

Razia Damji, Vice President

 

Senior Vice President/Chief Financial Officer

 

 

 

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GUARANTORS’ CONSENT, REAFFIRMATION AND GENERAL RELEASE

 

Each of the undersigned guarantors of all indebtedness of WILLDAN GROUP, INC. to
WELLS FARGO BANK, NATIONAL ASSOCIATION hereby:  (i) consents to the foregoing
Amendment; (ii) reaffirms its obligations under its respective Continuing
Guaranty; (iii) reaffirms its waivers of each and every one of the defenses to
such obligations as set forth in its respective Continuing Guaranty;
(iv) reaffirms that its obligations under its respective Continuing Guaranty are
separate and distinct from the obligations of any other party under said
Amendment and the other Loan Documents described therein; and (v) agrees to join
in and be bound by all of the terms and provisions of the General Release
contained in Paragraph 11 thereof.

 

GUARANTORS:

 

 

 

WILLDAN FINANCIAL SERVICES

 

 

 

By:

/s/ Thomas D. Brisbin

 

Title:

Sole Board Member

 

 

 

WILLDAN ENGINEERING

 

 

 

By:

/s/ Thomas D. Brisbin

 

Title:

Sole Board Member

 

 

 

WILLDAN HOMELAND SOLUTIONS

 

 

 

By:

/s/ Thomas D. Brisbin

 

Title:

Sole Board Member

 

 

 

WILLDAN ENERGY SOLUTIONS

 

 

 

By:

/s/ Thomas D. Brisbin

 

Title:

Sole Board Member

 

 

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