Exhibit 10.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of January 1, 2012,
by and between WILLDAN GROUP, INC., a Delaware corporation (“Borrower”), and
WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.        LINE OF CREDIT.

 

(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, 2013, 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 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 January 1, 2012 (“Line of Credit
Note”), all terms of which are incorporated herein by this reference.

 

(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 Five Million Dollars ($5,000,000.00). The form and substance
of each Letter of Credit shall be subject to approval by Bank, in its sole
discretion. No Letter of Credit shall have an expiration date more than three
hundred sixty five (365) days beyond 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.

 

(c)       Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.

 

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SECTION 1.2.        INTEREST/FEES.

 

(a)       Interest. The outstanding principal balance of each credit subject
hereto shall bear interest, and the amount of each drawing paid under any Letter
of Credit shall bear interest from the date such drawing is paid to the date
such amount is fully repaid by Borrower, at the rate of interest set forth in
each promissory note or other instrument or document executed in connection
therewith.

 

(b)      Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

 

(c)       Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one
quarter percent (0.25%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears within ten (10) days after each billing is sent
by Bank.

 

(d)      Letter of Credit Fees. Borrower shall pay to Bank fees upon the
issuance of each Letter of Credit, upon the payment or negotiation of each
drawing under any Letter of Credit and upon the occurrence of any other activity
with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank’s standard fees and charges then in effect for such
activity.

 

SECTION 1.3.        COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each credit subject hereto by
charging Borrower’s deposit account number 4121618235 with Bank, or any other
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

 

SECTION 1.4.        COLLATERAL.

 

As security for all indebtedness and other obligations of Borrower to Bank
subject hereto, 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
subject hereto, Borrower shall cause Willdan Financial Services, Willdan
Engineering, Willdan Homeland Solutions, Willdan Energy Solutions and any other
Subsidiary (as defined below) 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.

 

SECTION 1.5.        GUARANTIES. The payment and performance of all indebtedness
and other obligations of Borrower to Bank shall be guaranteed jointly and
severally by Willdan Financial Services, Willdan Engineering, Willdan Homeland
Solutions, Willdan Energy Solutions and any other Subsidiary in the principal
amount of Five Million Dollars ($5,000,000.00) each, as evidenced by and subject
to the terms of guaranties in form and substance satisfactory to Bank.”

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

 

SECTION 2.1.        LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of Delaware, and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.

 

Willdan Financial Services is a corporation, duly organized and existing and in
good standing under the laws of California, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on it. Borrower owns one hundred percent (100%) of Willdan
Financial Services.

 

Willdan Engineering is a corporation, duly organized and existing and in good
standing under the laws of California, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on it. Borrower owns one hundred percent (100%) of Willdan
Engineering.

 

Willdan Homeland Solutions is a corporation, duly organized and existing and in
good standing under the laws of California, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on it. Borrower owns one hundred percent (100%) of Willdan
Homeland Solutions.

 

Willdan Energy Solutions is a corporation, duly organized and existing and in
good standing under the laws of California, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on it. Borrower owns one hundred percent (100%) of Willdan Energy
Solutions.

 

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As used herein the term “Subsidiary” shall mean any corporation or other entity
of which at least a majority of the securities or other ownership interests
having ordinary voting power for the election of directors or other persons
performing similar functions are owned directly or indirectly by Borrower. As of
the date hereof, Willdan Financial Services, Willdan Engineering and Willdan
Homeland Solutions, Willdan Energy Solutions are the only Subsidiaries of
Borrower.

 

SECTION 2.2.        AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
“Loan Documents”) have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.

 

SECTION 2.3.        NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or any Subsidiary, or result in any breach of or default
under any contract, obligation, indenture or other instrument to which Borrower
is a party or by which Borrower may be bound.

 

SECTION 2.4.        LITIGATION. There are no pending, or to the best of
Borrower’s knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.

 

SECTION 2.5.        CORRECTNESS OF FINANCIAL STATEMENT. The annual financial
statement of Borrower dated December 31, 2010, and all interim financial
statements delivered to Bank since said date, true copies of which have been
delivered by Borrower to Bank prior to the date hereof, (a) are complete and
correct and present fairly the financial condition of Borrower, (b) disclose all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) have been prepared in accordance with
generally accepted accounting principles consistently applied. Since the dates
of such financial statements there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.

 

SECTION 2.6.        INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

 

SECTION 2.7.        NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower’s
obligations subject to this Agreement to any other obligation of Borrower.

 

SECTION 2.8.        PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

 

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SECTION 2.9.        ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time (“ERISA”); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

 

SECTION 2.10.      OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.

 

SECTION 2.11.      ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower’s operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1.        CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:

 

(a)       Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank’s counsel.

 

(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 to Borrow

(iii)

 

Certificate of Incumbency

(iv)

 

Continuing Guaranty from each guarantor listed in Section 1.5 hereof

(v)

 

Security Agreement Rights to Payment and Inventory

(vi)

 

Third Party Security Agreement Rights to Payment and Inventory (4)

(vii)

 

Third Party Corporate Resolution to Guaranty (4)

(viii)

 

Third Party Corporate Resolution to Grant Collateral (4)

(ix)

 

Third Party Corporate Resolution to Grant Collateral (4)

(x)

 

Such other documents as Bank may require under any other Section of this
Agreement.

 

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(c)       Financial Condition. There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower or any
guarantor hereunder, nor any material decline, as determined by Bank, in the
market value of any collateral required hereunder or a substantial or material
portion of the assets of Borrower or any such guarantor.

 

(d)      Insurance. Borrower shall, and shall cause each Subsidiary to, maintain
and keep in force insurance of the types and in amounts customarily carried in
similar lines of business, including but not limited to fire, extended coverage,
public liability, flood, property damage and workers’ compensation, with all
such insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank’s request schedules setting forth all
insurance then in effect.

 

SECTION 3.2.        CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank’s satisfaction of each of the following
conditions:

 

(a)       Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

 

(b)      Documentation. Bank shall have received all additional documents which
may be required in connection with such extension of credit.

 

(c)       Additional Letter of Credit Documentation.  Prior to the issuance of
each Letter of Credit, Bank shall have received a Letter of Credit Agreement,
properly completed and executed by borrower.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1.        PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein , and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.

 

SECTION 4.2.        ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

 

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

 

(a)       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;

 

(b)      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;

 

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

 

SECTION 4.4.        COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower’s continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

 

SECTION 4.5.        INSURANCE. Maintain and keep in force, for each business in
which Borrower is engaged, insurance of the types and in amounts customarily
carried in similar lines of business, including but not limited to fire,
extended coverage, public liability, flood, property damage and workers’
compensation, with all such insurance carried with companies and in amounts
satisfactory to Bank, and deliver to Bank from time to time at Bank’s request
schedules setting forth all insurance then in effect.

 

SECTION 4.6.        FACILITIES. Keep all properties useful or necessary to
Borrower’s business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

 

SECTION 4.7.        TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank’s satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

 

SECTION 4.8.        LITIGATION. Borrower shall promptly give notice in writing
to Bank of any litigation pending or threatened against Borrower or any
Subsidiary with a claim in excess of $500,000.00.

 

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)       Net income after taxes not less than $250,000.00, measured on a
rolling 4-quarter basis with no two consecutive quarterly losses.

 

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(b)      Total Funded Debt to EBITDA not greater than 1.75 to 1.0 as of each
quarter end, determined on a rolling 4-quarter basis; with “Funded Debt” defined
as the sum of all obligations for borrowed money (including subordinated debt)
plus all capital lease obligations, and with “EBITDA” defined as net profit
before tax plus interest expense (net of capitalized interest expense),
depreciation expense and amortization expense.

 

(c)       Minimum Asset Coverage Ratio not less than 2.50 to 1.00 as of each
quarter end with “Minimum Asset Coverage Ratio” defined as Unrestricted cash
plus net-billed Accounts Receivables divided by Line of Credit outstandings plus
issued Letters of Credit measured quarterly.

 

SECTION 4.10.      NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank’s prior written
consent:

 

SECTION 5.1.        USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

 

SECTION 5.2.        OTHER INDEBTEDNESS. Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any indebtedness or
liabilities resulting from borrowings, loans or advances, whether secured or
unsecured, matured or unmatured, liquidated or unliquidated, joint or several,
except (a) the liabilities of Borrower and Subsidiaries to Bank, (b) any other
liabilities of Borrower and Subsidiaries existing as of, and disclosed to Bank
prior to, the date hereof, and (c) purchase money indebtedness incurred
hereafter by Borrower in the ordinary course of its business, provided, that
such amount does not exceed $2,000,000.00 in the aggregate at any time.

 

SECTION 5.3.        MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Borrower will
not, and will not permit any Subsidiary to, merge into or consolidate with any
other entity; make any substantial change in the nature of Borrower’s or any
Subsidiary’s business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity except Permitted
Acquisitions (defined below); nor sell, lease, transfer or otherwise dispose of
all or a substantial or material portion of Borrower’s or any Subsidiary’s
assets except in the ordinary course of its business.

 

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As used herein, “Permitted Acquisitions” means any direct acquisition by
Borrower of (a) all or substantially all of the operating assets of any person
or entity; (b) all of the stock of any corporation provided, however, that all
of the following conditions are satisfied:

 

(i)        The assets, entity or line of business which is acquired is in a
substantially similar line of business as that of Borrower as its business is
conducted on the date of this Agreement.

 

(ii)       The acquisition is consummated in compliance with applicable law.

 

(iii)      There is no Event of Default, nor any act, condition or event which
with the giving of notice or the passage of time or both would constitute an
Event of Default, and no such Event of Default or potential Event of Default
would result after giving effect to the acquisition.

 

(iv)     Borrower gives Bank at least thirty (30) days prior notice of the
acquisition;

 

(v)      Borrower furnishes Bank with copies of such documents and with such
information pertaining to the acquisition as Bank may require, including without
limitation copies of any acquisition agreement and formation documents of any
acquired company.

 

(vi)     Borrower furnishes Bank with financial statements of the company to be
acquired (or the company whose assets are being acquired) showing that such
company has maintained EBITDA of not less than $1.00 as of the end of each of
the two fiscal years preceding the date of the closing of any such acquisition,
with “EBITDA” defined as net profit before tax plus interest expense (net of
capitalized interest expense), depreciation expense and amortization expense,
with compliance determined by using generally accepted accounting principles
consistently applied and used consistently with prior practices.

 

(vii)    The aggregate consideration (valuing any non-cash consideration at its
fair market value, and including without limitation the amount of all
liabilities assumed or acquired) does not exceed Five Million Dollars
($5,000,000.00) for any individual acquisition and Ten Million Dollars
($10,000,000.00) for all such acquisitions in the aggregate during any fiscal
year.

 

(viii)   Borrower causes each company acquired pursuant to the provisions hereof
to (a) guaranty the payment and performance of all indebtedness and other
obligations of Borrower to Bank hereunder, and (b) grant to Bank security
interests of first priority in all such company’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 subject hereto.
Borrower shall cause each such company to execute guaranties, security
agreements and such other documents as Bank may require in connection herewith,
all of which shall be in form and substance satisfactory to Bank.

 

SECTION 5.4.        GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.

 

SECTION 5.5.        LOANS, ADVANCES, INVESTMENTS. Borrower will not, and will
not permit any Subsidiary to, make any loans or advances to or investments in
any person or entity, except (a) any of the foregoing existing as of, and
disclosed to Bank prior to, the date hereof, and (b) loans or advances made
hereafter by Borrower to any third party in the ordinary course of Borrower’s
business provided that such amounts do not exceed $2,000,000.00 in the aggregate
at any time.

 

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SECTION 5.6.        DIVIDENDS, DISTRIBUTIONS. SHARE REPURCHASES. Borrower will
not declare or pay any dividend or distribution either in cash, stock or any
other property on Borrower’s stock now or hereafter outstanding, nor redeem,
retire, repurchase or otherwise acquire any shares of any class of Borrower’s
stock now or hereafter outstanding. Notwithstanding the foregoing, Borrower may
make lawful repurchases of any shares of any class of Borrower’s stock now or
hereafter outstanding, provided that the aggregate fair market valuation of any
such repurchased shares does not exceed $5,000,000.00 in the aggregate during
any calendar year, and provided, further, that there exists no Event of Default,
or any act, condition or event which with the giving of notice or the passage of
time or both would constitute such an Event of Default, or if any such Event of
Default would result after giving effect to any such contemplated repurchase.

 

SECTION 5.7.        PLEDGE OF ASSETS. Borrower will not, and will not permit any
Subsidiary to, mortgage, pledge, grant or permit to exist a security interest
in, or lien upon, all or any portion of Borrower’s or any Subsidiary’s assets
now owned or hereafter acquired, except (a) any of the foregoing in favor of
Bank or which is existing as of, and disclosed to Bank in writing prior to, the
date hereof and (b) purchase money liens to the extent they secure purchase
money debt permitted under Section 5.2 hereof.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1.        The occurrence of any of the following shall constitute an
“Event of Default” under this Agreement:

 

(a)       Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.

 

(b)      Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.

 

(c)       Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those specifically described as an “Event of Default” in this
section 6.1), and with respect to any such default that by its nature can be
cured, such default shall continue for a period of twenty (20) days from its
occurrence.

 

(d)      Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract, instrument or
document (other than any of the Loan Documents) pursuant to which Borrower, any
guarantor hereunder or any general partner or joint venturer in Borrower if a
partnership or joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a “Third Party Obligor”) has incurred any
debt or other liability to any person or entity, including Bank.

 

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(e)       The filing of a notice of judgment lien against Borrower or any Third
Party Obligor; or the recording of any abstract of judgment against Borrower or
any Third Party Obligor in any county in which Borrower or such Third Party
Obligor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any Third Party Obligor; or the entry of a judgment
against Borrower or any Third Party Obligor.

 

(f)       Borrower or any Third Party Obligor shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Third Party Obligor shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time (“Bankruptcy Code”), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any Third Party
Obligor, or Borrower or any Third Party Obligor shall file an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any Third Party Obligor shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower or any Third
Party Obligor by any court of competent jurisdiction under the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.

 

(g)      There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.

 

(h)      The death or incapacity of Borrower or any Third Party Obligor if an
individual. The dissolution or liquidation of Borrower or any Third Party
Obligor if a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor, or any of its directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of Borrower or such Third Party Obligor.

 

(i)        Borrower ceases to own one hundred percent (100%) of any Subsidiary.

 

(j)        A Change in Control of Borrower, and as used herein, “Change in
Control” means (a) any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
other than a trustee or other fiduciary holding securities of the Company under
an employee benefit plan of Borrower, becomes the “beneficial owner” (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Borrower representing 25% or more of (A) the outstanding
shares of common stock of Borrower or (B) the combined voting power of
Borrower’s then outstanding securities; or (b) the Borrower is party to a merger
or consolidation which results in the voting securities of the Borrower
outstanding immediately prior thereto failing to continue to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving or another entity) at least twenty five (25%) percent of the combined
voting power of the voting securities of the Borrower or such surviving or other
entity outstanding immediately after such merger or consolidation.

 

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SECTION 6.2.        REMEDIES. Upon the occurrence of any Event of Default:
(a) all indebtedness of Borrower under each of the Loan Documents, any term
thereof to the contrary notwithstanding, shall at Bank’s option and without
notice become immediately due and payable without presentment, demand, protest
or notice of dishonor, all of which are hereby expressly waived by Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.        NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

 

SECTION 7.2.        NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

BORROWER:

 

WILLDAN GROUP, INC.

 

 

2401 E. Katella Avenue

 

 

Suite 300

 

 

Anaheim, CA 92806

 

 

 

BANK:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

 

Greater Los Angeles East Regional Commercial Banking Office

 

 

1000 Lakes Drive, 2nd Floor

 

 

West Covina, CA 91790

 

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

 

SECTION 7.3.        COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of Bank’s in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank’s continued administration hereof
and thereof, and the preparation of any amendments and

 

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waivers hereto and thereto, (b) the enforcement of Bank’s rights and/or the
collection of any amounts which become due to Bank under any of the Loan
Documents, and (c) the prosecution or defense of any action in any way related
to any of the Loan Documents, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Borrower or any other person or entity.

 

SECTION 7.4.        SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interests or rights hereunder without
Bank’s prior written consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Bank’s rights and benefits under each of the Loan Documents. In connection
therewith, Bank may disclose all documents and information which Bank now has or
may hereafter acquire relating to any credit subject hereto, Borrower or its
business, any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.

 

SECTION 7.5.        ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

 

SECTION 7.6.        NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

 

SECTION 7.7.        TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.

 

SECTION 7.8.        SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

 

SECTION 7.9.        COUNTERPARTS. This Agreement 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 Agreement.

 

SECTION 7.10.      GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.

 

SECTION 7.11.      ARBITRATION.

 

(a)       Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise in any way arising out of
or relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.

 

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(b)      Governing Rules. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

 

(c)       No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)      Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal
Rules of Civil Procedure, the California Rules of Civil Procedure or other
applicable law. Judgment upon

 

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the award rendered by the arbitrator may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.

 

(e)       Discovery. In any arbitration proceeding, discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party’s presentation and that no alternative means for
obtaining information is available.

 

(f)       Class Proceedings and Consolidations. No party hereto shall be
entitled to join or consolidate disputes by or against others in any
arbitration, except parties who have executed any Loan Document, or to include
in any arbitration any dispute as a representative or member of a class, or to
act in any arbitration in the interest of the general public or in a private
attorney general capacity.

 

(g)      Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.

 

(h)      Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

 

(i)        Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

 

(j)        Small Claims Court. Notwithstanding anything herein to the contrary,
each party retains the right to pursue in Small Claims Court any dispute within
that court’s jurisdiction. Further, this arbitration provision shall apply only
to disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement 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/ Catherine Abe

 

Kimberly D. Gant,

 

 

Catherine Abe, Vice President

 

Senior Vice President,

 

 

 

 

Chief Financial Officer

 

 

 

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