Document:

EXHIBIT
10.2

Management Incentive Plan

(Adopted
August 16, 2007)

Objectives
of the Plan

The
Management Incentive Plan (the Plan) is designed to provide an additional
performance incentive to increase the value of our company on a sustained basis
in accordance with our operational and strategic objectives.  The Plan will demonstrate to our shareholders
that we attach great priority to their interests.  The Plan will:  reward those individuals who significantly
impact company results, encourage increased teamwork among all disciplines
within the Company and incorporate an incentive program within the overall
compensation program to help attract, retain, motivate and appropriately
compensate key employees.

Eligibility

All
executive officers of the Company and managers as defined by the CEO and
approved by the Compensation Committee of the MedicalCV, Inc. Board of
Directors.

General
Outline of the Plan

At
the beginning of each performance period, for each eligible position, the CEO
will work with each participant to establish performance measures and award
opportunity levels (% of base).  These
will be presented to the Board of Directors for approval.

Performance
measures will consist of both corporate wide goals and individual goals.
Multiple performance goals will be developed for each category.

100%
performance is defined as achieving “stretch but achievable” targets meaning
that the intent is continuous improvement, not the status quo.

Each goal will contain the following ingredients:

·                  The performance criteria (i.e. what we need
to do, i.e. sell the facility)

·                  The performance standards (i.e. sell it for
more than $1.5 million)

·                  The
performance measures (i.e. measure and report by actual sales price)

These
goals shall have a minimum performance standard below which no payments will be
made, a target performance level and a maximum performance standard above which
no additional payments will be made. 
These will be referred to as award opportunity levels.

Corporate
performance measures will be the basis for 70% of the total bonus payout.  The remaining 30% of the total bonus payout
is based on individual goals.

Period of Measurement

The
performance period is one year.

Award Opportunity Levels

For each eligible position a minimum, target, and
maximum award opportunity level will be established.  No minimum will be less than 15%, and no
maximum will be above 45%.

Time of payment of the plan

All
bonuses shall be paid no later than fifty (50) days after the end of the
performance period to which the bonus relates.

Form of
Payout

Payout
will be in the form of cash.

Determination of Bonus Amount

The total dollar value of
the bonus for each individual will be calculated as follows:

(corporate achievement level times base salary times 70%) plus (individual
achievement level times base salary times 30%).

The total value will then be paid in cash.

Payments in the event of a change in employment

The
bonus payout for any participant who becomes a participant after the start of
the Plan period or is on a leave of absence for a portion of the Plan period or
whose employment with the company is terminated prior to the end of the Plan
period because of disability or death will be prorated.

A
prorated Bonus will be calculated by multiplying the number of full months
during which the participant participated in the Plan during the Plan period.
Credit will be given for a full month if the Participant is eligible for 15 or
more calendar days during that month.

Participation
will conclude upon termination of the Participant’s employment, withdrawal of
selection by the Compensation Committee, transfer to a position compensated
otherwise than as provided in the Plan, or termination of the Plan by the
Company.

Payments in the event of a change in control

If,
after a Change in Control, the Company or its successor does not continue or
assume the Plan, each Participant shall be entitled to a pro rata share (based
on length of service as a Participant during such Plan period prior to the
event which triggered this provision) of his or her bonus.

Management rights to modify the
plan under certain conditions

At
the discretion of the CEO and/or Compensation Committee of the Board,
performance criteria are subject to revision based on changes in circumstances
including new business direction or extraordinary events.

Management rights to cancel the plan

The
Plan will be reviewed by the Compensation Committee on a periodic basis for
revisions. The Company reserves the right at its discretion with or without
notice, to review, change amend or cancel the Plan, at any time.

Non-assignment or transfer of rights in the plan

Employees
may not assign or transfer their rights in the plan.

Management rights to administer and interpret provisions of the plan

Management
reserves the right to administer and interpret provisions of the plan.

Miscellaneous

The
granting of a bonus to a Participant shall not confer on any Participant any
right to continuing employment by the Company or to receive a bonus for any
subsequent Plan Period or to receive benefits under any other compensation or
benefit plan of the Company.

Stock
Options

Company
stock options will be granted only upon overall evaluations of employee
performance by management and the recommendation of the CEO to the Compensation
Committee.  Stock options will be granted
at the discretion of the Compensation Committee with MedicalCV Board approval
at fiscal year end.Exhibit
10.1

BUSINESS LOAN AGREEMENT (ASSET BASED)

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  
	
  $

  	
  8,000,000.00

  	
   

  	
  08-02-2007

  	
   

  	
  08-10-2008

  	
   

  	
  10176244

  	
   

  	
  4A /
  430

  	
   

  	
   

  	
   

  	
  NG1

  	
   

  	
   

  
																

 

References in the shaded area are for Lender’s use only and do not limit
the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length
limitations.

	
  Borrower:

  	
  Willdan Group, Inc.

  2401 East Katella Avenue, Suite 300

  Anaheim, CA 92806

  	
  Lender:

  	
  Orange County Business Bank

  Main Office

  4675 MacArthur Court

  Suite 100

  Newport Beach, CA 92660

  

 

THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) dated August 16, 2007, is made and
executed between Willdan Group, Inc. (“Borrower”) and Orange County Business
Bank  (“Lender”) on the following terms
and conditions.  Borrower has received
prior commercial loans from Lender or has applied to Lender for a commercial
loan or loans or other financial accommodations, including those which may be
described on any exhibit or schedule attached to this Agreement (“Loan”).  Borrower understands and agrees that:  (A)  in
granting, renewing, or extending any Loan, Lender is relying upon Borrower’s
representations, warranties, and agreements as set forth in this
Agreement;  (B)  the granting, renewing, or extending of any
Loan by Lender at all times shall be subject to Lender’s sole judgment and
discretion; and  (C)  all such Loans shall be and remain subject to
the terms and conditions of this Agreement.

TERM.  This
Agreement shall be effective as of August 02, 2007, and shall continue in full
force and effect until such time as all of Borrower’s Loans in favor of Lender
have been paid in full, including principal, interest, costs, expenses, attorneys’
fees, and other fees and charges, or until such time as the parties may agree
in writing to terminate this Agreement.

ADVANCE
AUTHORITY.  The following persons currently are
authorized, except as provided in this paragraph, to request advances and authorize
payments under the line of credit until Lender receives from Borrower, at
Lender’s address shown above, written notice of revocation of their authority:  Win S.
Westfall; Roy L. Gill; Mallory 
McCamant;  Kate Mai Nguyen;
Kimberly Gant and Thomas Brisbin.  In
addition to requesting advances orally or in writing, advances may be requested
via online banking or loan sweep.

LINE OF
CREDIT.  Lender agrees to make Advances to Borrower
from time to time from the date of this Agreement to the Expiration Date,
provided the aggregate amount of such Advances outstanding at any time does not
exceed the Borrowing Base.  Within the
foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow
under this Agreement as follows:

Conditions
Precedent to Each Advance.  Lender’s obligation to make any
Advance to or for the account of Borrower under this Agreement is subject to
the following conditions precedent, with all documents, instruments, opinions,
reports, and other items required under this Agreement to be in form and
substance satisfactory to Lender:

(1)  Lender shall have received evidence that this
Agreement and all Related Documents have been duly authorized, executed, and
delivered by Borrower to Lender.

(2)  Lender shall have received such opinions of
counsel, supplemental opinions, and documents as Lender may request.

(3)  The security interests in the Collateral
shall have been duly authorized, created, and perfected with first lien
priority and shall be in full force and effect.

(4)  All guaranties required by Lender for the
credit facility(ies) shall have been executed by each Guarantor, delivered to
Lender, and be in full force and effect.

(5)  Lender, at its option and for its sole
benefit, shall have conducted an audit of Borrower’s Accounts, books, records,
and operations, and Lender shall be satisfied as to their condition.

(6)  Borrower shall have paid to Lender all fees,
costs, and expenses specified in this Agreement and the Related Documents as
are then due and payable.

(7)  There shall not exist at the time of any
Advance a condition which would constitute an Event of Default under this
Agreement, and Borrower shall have delivered to Lender the compliance
certificate called for in the paragraph below titled “Compliance Certificate.”

Making Loan
Advances.  Advances under this credit facility, as well
as directions for payment from Borrower’s accounts, may be requested orally or
in writing by authorized persons.  Lender
may, but need not, require that all oral requests be confirmed in writing.  Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of Borrower (1)  when credited to any deposit account of
Borrower maintained with Lender or (2) 
when advanced in accordance with the instructions of an authorized
person.  Lender, at its option, may set a
cutoff time, after which all requests for Advances will be treated as having
been requested on the next succeeding Business Day.

Mandatory
Loan Repayments.  If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. 
On the Expiration Date, Borrower shall pay to Lender in full the
aggregate unpaid principal amount of all Advances then outstanding and all
accrued unpaid interest, together with all other applicable fees, costs and
charges, if any, not yet paid.

Loan
Account.  Lender shall maintain on its books a record
of account in which Lender shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the credit
facility.  Lender shall provide Borrower
with periodic statements of Borrower’s account, which statements shall be
considered to be correct and conclusively binding on Borrower unless Borrower
notifies Lender to the contrary within thirty (30) days after Borrower’s
receipt of any such statement which Borrower deems to be incorrect.

COLLATERAL.  To
secure payment of the Primary Credit Facility and performance of all other
Loans, obligations and duties owed by Borrower to Lender, Borrower (and others,
if required) shall grant to Lender Security Interests in such property and
assets as Lender may require.  Lender’s
Security Interests in the Collateral shall be continuing liens and shall
include the proceeds and products of the Collateral, including without
limitation the proceeds of any insurance. 
With respect to the Collateral, Borrower agrees and represents and
warrants to Lender:

Perfection
of Security Interests.  Borrower agrees to execute all documents
perfecting Lender’s Security Interest and to take whatever actions are
requested by Lender to perfect and continue Lender’s Security Interests in the
Collateral.  Upon request of Lender,
Borrower will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Borrower will note Lender’s interest upon any
and all chattel paper and instruments if not delivered to Lender for possession
by Lender.  Contemporaneous with the
execution of this Agreement, Borrower will execute one or more UCC financing
statements and any similar statements as may be required by applicable law, and
Lender will file such financing statements and all such similar statements in
the appropriate location or locations. 
Borrower hereby appoints Lender as its irrevocable attorney-in-fact for
the purpose of executing any documents necessary to perfect or to continue any
Security Interest.  Lender may at any
time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for use
as a financing statement.  Borrower will
reimburse Lender for all expenses for the perfection, termination, and the
continuation of the perfection of Lender’s security interest in the
Collateral.  Borrower promptly will
notify Lender before any change in Borrower’s name including any change to the
assumed business names of Borrower. 
Borrower also promptly will notify Lender before any change in Borrower’s
Social Security Number or Employer Identification Number.  Borrower further agrees to notify Lender in
writing prior to any change in address or location of Borrower’s principal
governance office or should Borrower merge or consolidate with any other
entity.

Collateral
Records.  Borrower does now, and at all times hereafter
shall, keep correct and accurate records of the Collateral, all of which
records shall be available to Lender or Lender’s representative upon demand for
inspection and copying at any reasonable time. 
With respect to the Accounts, Borrower agrees to keep and maintain such
records as Lender may require, including without limitation information
concerning Eligible Accounts and Account balances and agings.  Records related to Accounts (Receivables) are
or will be located at 2401 East Katella Aenue, #300, Anaheim, CA 92806.  The above is an accurate and complete list of
all locations at which Borrower keeps or maintains business records concerning
Borrower’s collateral.

Collateral
Schedules.  Concurrently with the execution and delivery
of this Agreement, Borrower shall execute and deliver to Lender schedules of
Accounts and schedules of Eligible Accounts in form and substance satisfactory
to the Lender.  Thereafter supplemental
schedules shall be delivered according to the following schedule:  With respect to Eligible Accounts, schedules
shall be delivered within forty five (45) of each month end.

Representations
and Warranties Concerning Accounts.  With respect to the Accounts,
Borrower represents and warrants to Lender: 
(1)  Each Account represented by
Borrower to be an Eligible Account for purposes of this Agreement conforms to the
requirements of the definition of an Eligible Account;  (2) 
All Account information listed on schedules delivered to Lender will be
true and correct, subject to immaterial variance; and  (3) 
Lender, its assigns, or agents shall have the right at any time and at
Borrower’s expense to inspect, examine, and audit Borrower’s records and to
confirm with Account Debtors the accuracy of such Accounts.

CONDITIONS
PRECEDENT TO EACH ADVANCE.  Lender’s obligation to make the
initial Advance and each subsequent Advance under this Agreement shall be
subject to the fulfillment to Lender’s satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.

Loan
Documents.  Borrower shall provide to Lender the
following documents for the Loan: 
(1)  the Note;  (2) 
Security Agreements granting to Lender security interests in the
Collateral;  (3)  financing statements and all other documents
perfecting Lender’s Security Interests; 
(4)  evidence of insurance as
required below;  (5)  guaranties; 
(6)  together with all such
Related Documents as Lender may require for the Loan; all in form and substance
satisfactory to Lender and Lender’s counsel.

Borrower’s
Authorization.  Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents.  In addition, Borrower
shall have provided such other resolutions, authorizations, documents and
instruments as Lender or its counsel, may require.

Fees and
Expenses Under This Agreement.  Borrower shall have paid to
Lender all fees, costs, and expenses specified in this Agreement and the
Related Documents as are then due and payable.

Representations
and Warranties.  The representations and warranties set forth
in this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.

No Event of
Default.  There shall not exist at the time of any
Advance a condition which would constitute an Event of Default under this
Agreement or under any Related Document.

REPRESENTATIONS
AND WARRANTIES.  Borrower represents and warrants to Lender,
as of the date of this Agreement, as of the date of each disbursement of loan proceeds,
as of the date of any renewal, extension or modification of any Loan, and at
all times any Indebtedness exists:

Organization. 
Borrower is a corporation for profit which is, and at all times shall
be, duly organized, validly existing, and in good standing under and by virtue
of the laws of the State of Delaware. 
Borrower is duly authorized to transact business in all other states in
which Borrower is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which Borrower is doing business.  Specifically, Borrower is, and at all times
shall be, duly qualified as a foreign corporation in all states in which the
failure to so qualify would have a material adverse effect on its business or
financial condition.  Borrower has the
full power and authority to own its properties and to transact the business in
which it is presently engaged or presently proposes to engage.  Borrower maintains an office at 2401 East
Katella Avenue, Suite 300, Anaheim, CA 
92806.  Unless Borrower has
designated otherwise in writing, the principal office is the office at which
Borrower keeps its books and records including its records concerning the
Collateral.  Borrower will notify Lender
prior to any change in the location of Borrower’s state of organization or any
change in Borrower’s name.  Borrower
shall do all things necessary to preserve and to keep in full force and effect
its existence, rights and privileges, and shall comply with all regulations,
rules, ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrower’s
business activities.

 2
 

Assumed
Business Names.  Borrower has filed or recorded all documents
or filings required by law relating to all assumed business names used by
Borrower.  Excluding the name of
Borrower, the following is a complete list of all assumed business names under
which Borrower does business:  None.

Authorization. 
Borrower’s execution, delivery, and performance of this Agreement and
all the Related Documents have been duly authorized by all necessary action by
Borrower and do not conflict with, result in a violation of, or constitute a
default under  (1)  any provision of  (a) 
Borrower’s articles of incorporation or organization, or bylaws, or  (b) 
any agreement or other instrument binding upon Borrower or  (2) 
any law, governmental regulation, court decree, or order applicable to
Borrower or to Borrower’s properties.

Financial
Information.  Each of Borrower’s financial statements
supplied to Lender truly and completely disclosed Borrower’s financial
condition as of the date of the statement, and there has been no material
adverse change in Borrower’s financial condition subsequent to the date of the
most recent financial statement supplied to Lender.  Borrower has no material contingent
obligations except as disclosed in such financial statements.

Legal
Effect.  This Agreement constitutes, and any
instrument or agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.

Properties.  Except
as contemplated by this Agreement or as previously disclosed in Borrower’s
financial statements or in writing to Lender and as accepted by Lender, and
except for property tax liens for taxes not presently due and payable, Borrower
owns and has good title to all of Borrower’s properties free and clear of all
Security Interests, and has not executed any security documents or financing
statements relating to such properties. 
All of Borrower’s properties are titled in Borrower’s legal name, and
Borrower has not used or filed a financing statement under any other name for
at least the last five (5) years.

Hazardous
Substances.  Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that:  (1) 
During the period of Borrower’s ownership of the Collateral, there has
been no use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under, about or
from any of the Collateral.  (2)  Borrower has no knowledge of, or reason to
believe that there has been  (a)  any breach or violation of any Environmental
Laws;  (b)  any use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any Hazardous Substance
on, under, about or from the Collateral by any prior owners or occupants of any
of the Collateral; or  (c)  any actual or threatened litigation or claims
of any kind by any person relating to such matters.  (3) 
Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store, treat, dispose
of or release any Hazardous Substance on, under, about or from any of the
Collateral; and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation all Environmental Laws.  Borrower authorizes Lender and its agents to
enter upon the Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with this section of the
Agreement.  Any inspections or tests made
by Lender shall be at Borrower’s expense and for Lender’s purposes only and
shall not be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. 
The representations and warranties contained herein are based on
Borrower’s due diligence in investigating the Collateral for hazardous waste
and Hazardous Substances.  Borrower
hereby  (1)  releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and 
(2)  agrees to indemnify, defend,
and hold harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release or
threatened release of a hazardous waste or substance on the Collateral.  The provisions of this section of the
Agreement, including the obligation to indemnify and defend, shall survive the
payment of the Indebtedness and the termination, expiration or satisfaction of
this Agreement and shall not be affected by Lender’s acquisition of any
interest in any of the Collateral, whether by foreclosure or otherwise.

Litigation
and Claims.  No material litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred
which may materially adversely affect Borrower’s financial condition or
properties, other than litigation, claims, or other events, if any, that have
been disclosed to and acknowledged by Lender in writing.

Taxes.  To the
best of Borrower’s knowledge, all of Borrower’s tax returns and reports that
are or were required to be filed, have been filed, and all taxes, assessments
and other governmental charges have been paid in full, except those presently
being or to be contested by Borrower in good faith in the ordinary course of
business and for which adequate reserves have been provided.

Lien
Priority.  Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on
or affecting any of the Collateral directly or indirectly securing repayment of
Borrower’s Loan and Note, that would be prior or that may in any way be
superior to Lender’s Security Interests and rights in and to such Collateral.

Binding
Effect.  This Agreement, the Note, all Security
Agreements (if any), and all Related Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.

AFFIRMATIVE
COVENANTS.  Borrower covenants and agrees with Lender
that, so long as this Agreement remains in effect, Borrower will:

Notices of
Claims and Litigation.  Promptly inform Lender in writing of  (1) 
all material adverse changes in Borrower’s financial condition, and  (2) 
all existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or the
financial condition of any Guarantor.

Financial
Records.  Maintain its books and records in accordance
with GAAP, applied on a consistent basis, and permit Lender to examine and
audit Borrower’s books and records at all reasonable times.

Financial
Statements.  Furnish Lender with the following:

Additional
Requirements.  Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall submit to Lender in
substance and form satisfactory to Lender:

Borrower’s annual CPA
unqualified audited financial statements (including balance sheet and income
statement) as soon as available and in no event later than one hundred fifty
(150) days after each fiscal year end. 
Said financial statements shall be the consolidated statements of
Willdan Group, Inc., including but not limited to all corporate Guarantors of
herein described credit facility.

Borrower’s monthly company
prepared financial statements (including balance sheet and income statement) as
soon as available and in no event later than forty five (45) days after each
month end.

 3
 

Borrower’s quarterly 10Q
Reports as soon as available and in no event later than forty five (45) days
after each quarter end.

Borrower shall submit monthly
accounts receivable agings, accounts payable agings and work in process reports
within forty five (45) days of each month end.

ADDITIONAL
PROVISIONS:

Borrower agrees to maintain
its principal depository relationship with Lender.

Borrower  agrees that there will be no acquisitions of
other companies without prior written consent of Lender.

All financial reports
required to be provided under this Agreement shall be prepared in accordance
with GAAP, applied on a consistent basis, and certified by Borrower as being
true and correct.

Additional
Information.  Furnish such additional information and
statements, as Lender may request from time to time.

Financial
Covenants and Ratios.  Comply with the following covenants and
ratios:

Other
Requirements.

Minimum
Tangible Net Worth.  Maintain a minimum tangible net worth of $24,500,000.00. “Tangible Net Worth” is the
amount that total assets exceed total liabilities. For determining tangible net
worth, total assets will exclude all intangible assets, including without
limitation goodwill, patents, trademarks, trade names, copyrights and
franchises and will also exclude all Accounts Receivable owed by any Insiders,
that do not provide for a repayment schedule. 
To be measured quarterly.

Current
Ratio.  Maintain a Current Ratio in excess of 1:10 to 1.00.  The term “Current Ratio” means Borrower’s
total Current Assets divided by Borrower’s total Current Liabilities.  This liquidity ratio will be evaluated at
each quarter end.

Debt Service
Coverage Ratio.  Maintain a ratio of Debt Service Coverage in
excess of 1:50 to 1:00.  The term “Debt Service Coverage” means
Borrower’s Net Profits plus Depreciation, Depletion and Amortization divided by
Borrower’s Current Portion of Long Term Indebtedness.  This coverage ratio will be evaluated at each
year end.

Except as provided above, all
computations made to determine compliance with the requirements contained in
this paragraph shall be made in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as being
true and correct.

Insurance. 
Maintain fire and other risk insurance, public liability insurance, and
such other insurance as Lender may require with respect to Borrower’s
properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender. Borrower stipulates that coverages will not be
cancelled or diminished without at least thirty (30) days prior written notice
to Lender.  Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender will
not be impaired in any way by any act, omission or default of Borrower or any
other person.  In connection with all
policies covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with such lender’s loss
payable or other endorsements as Lender may require.

Insurance Reports. 
Furnish to Lender, upon request of Lender, reports on each existing
insurance policy showing such information as Lender may reasonably request,
including without limitation the following: 
(1)  the name of the insurer;  (2) 
the risks insured;  (3)  the amount of the policy;  (4) 
the properties insured;  (5)  the then current property values on the basis
of which insurance has been obtained, and the manner of determining those
values; and  (6)  the expiration date of the policy.  In addition, upon request of Lender (however
not more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral.  The
cost of such appraisal shall be paid by Borrower.

Guaranties.  Prior
to disbursement of any Loan proceeds, furnish executed guaranties of the Loans
in favor of Lender, executed by the guarantors named below, on Lender’s forms,
and in the amounts and under the conditions set forth in those guaranties.

	
  Names of Guarantors

  	
   

  	
  Amounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Willdan

  	
   

  	
  $

  	
  8,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Arroyo
  Geotechnical

  	
   

  	
  $

  	
  8,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  MuniFinancial

  	
   

  	
  $

  	
  8,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  American Homeland Solutions

  	
   

  	
  $

  	
  8,000,000.00

  	
   

  

 

Other
Agreements.  Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.

Loan
Proceeds.  Use all Loan proceeds solely for Borrower’s
business operations, unless specifically consented to the contrary by Lender in
writing.

Taxes,
Charges and Liens.  Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the date
on which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower’s properties, income, or profits.

Performance. 
Perform and comply, in a timely manner, with all terms, conditions, and
provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender.  Borrower shall notify Lender immediately in
writing of any default in connection with any agreement.

Operations. 
Maintain executive and management personnel with substantially the same
qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any material change in executive
and management personnel; conduct its business affairs in a reasonable and
prudent manner.

 4
 

Environmental
Studies.  Promptly conduct and complete, at Borrower’s
expense, all such investigations, studies, samplings and testings as may be
requested by Lender or any governmental authority relative to any substance, or
any waste or by-product of any substance defined as toxic or a hazardous
substance under applicable federal, state, or local law, rule, regulation,
order or directive, at or affecting any property or any facility owned, leased
or used by Borrower.

Compliance
with Governmental Requirements.  Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrower’s properties, businesses and
operations, and to the use or occupancy of the Collateral, including without
limitation, the Americans With Disabilities Act.  Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s
interests in the Collateral are not jeopardized.  Lender may require Borrower to post adequate
security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s
interest.

Inspection.  Permit
employees or agents of Lender at any reasonable time to inspect any and all
Collateral for the Loan or Loans and Borrower’s other properties and to examine
or audit Borrower’s books, accounts, and records and to make copies and
memoranda of Borrower’s books, accounts, and records.  If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated records
and computer software programs for the generation of such records) in the
possession of a third party, Borrower, upon request of Lender, shall notify
such party to permit Lender free access to such records at all reasonable times
and to provide Lender with copies of any records it may request, all at
Borrower’s expense.

Environmental
Compliance and Reports.  Borrower shall comply in all respects with
any and all Environmental Laws; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Borrower’s part or on the
part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of
a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.

Additional
Assurances.  Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender or
its attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.

LENDER’S
EXPENDITURES.  If any action or proceeding is commenced that
would materially affect Lender’s interest in the Collateral or if Borrower
fails to comply with any provision of this Agreement or any Related Documents,
including but not limited to Borrower’s failure to discharge or pay when due
any amounts Borrower is required to discharge or pay under this Agreement or
any Related Documents, Lender on Borrower’s behalf may (but shall not be
obligated to) take any action that Lender deems appropriate, including but not
limited to discharging or paying all taxes, liens, security interests,
encumbrances and other claims, at any time levied or placed on any Collateral
and paying all costs for insuring, maintaining and preserving any
Collateral.  All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the
rate charged under the Note from the date incurred or paid by Lender to the
date of repayment by Borrower.  All such
expenses will become a part of the Indebtedness and, at Lender’s option, will  (A)  be
payable on demand;  (B)  be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either  (1)  the term of any applicable insurance policy;
or  (2) 
the remaining term of the Note; or 
(C)  be treated as a balloon
payment which will be due and payable at the Note’s maturity.

NEGATIVE
COVENANTS.  Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not, without the prior
written consent of Lender:

Indebtedness
and Liens.  (1) 
Except for trade debt incurred in the normal course of business and
indebtedness to Lender contemplated by this Agreement, create, incur or assume
indebtedness for borrowed money, including capital leases,  (2) 
sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower’s assets (except as allowed as
Permitted Liens), or  (3)  sell with recourse any of Borrower’s
accounts, except to Lender.

Continuity
of Operations.  (1) 
Engage in any business activities substantially different than those in
which Borrower is presently engaged, 
(2)  cease operations, liquidate,
merge, transfer, acquire or consolidate with any other entity, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of business,
or  (3) 
pay any dividends on Borrower’s stock (other than dividends payable in
its stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a “Subchapter S Corporation” (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may pay
cash dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of Borrower’s stock, or
purchase or retire any of Borrower’s outstanding shares or alter or amend
Borrower’s capital structure.

Loans,
Acquisitions and Guaranties.  Other than in the ordinary
course of business  (1)  Loan, invest in or advance money or assets to
any other person, enterprise or entity, 
(2)  purchase, create or acquire
any interest in any other enterprise or entity, or  (3) 
incur any obligation as surety or guarantor.

Agreements. 
Borrower will not enter into any agreement containing any provisions
which would be violated or breached by the performance of Borrower’s
obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES.  If
Lender has made any commitment to make any Loan to Borrower, whether under this
Agreement or under any other agreement, Lender shall have no obligation to make
Loan Advances or to disburse Loan proceeds if: 
(A)  Borrower or any Guarantor is
in default under the terms of this Agreement or any of the Related Documents or
any other agreement that Borrower or any Guarantor has with Lender;  (B) 
Borrower or any Guarantor dies, becomes incompetent or becomes
insolvent, files a petition in bankruptcy or similar proceedings, or is
adjudged a bankrupt;  (C)  there occurs a material adverse change in
Borrower’s financial condition, in the financial condition of any Guarantor, or
in the value of any Collateral securing any Loan; or  (D) 
any Guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such Guarantor’s guaranty of the Loan or any other loan with Lender.

 5
 

DEFAULT.  Each
of the following shall constitute an Event of Default under this Agreement:

Payment
Default.  Borrower fails to make any payment when due
under the Loan within ten (10) days of due date.

Other Defaults. 
Borrower fails to comply with or to perform any other material term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower within twenty (20) days of notice from Lender.

False
Statements.  Any warranty, representation or statement
made or furnished to Lender by Borrower or on Borrower’s behalf under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made.

Insolvency.  The
dissolution or termination of Borrower’s existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower’s
property, any assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

Defective
Collateralization.  This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien)
at any time and for any reason.  If such
event occurs, Borrower and Lender will in a timely manner cure such defect.

Creditor or
Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan.  This
includes a garnishment of any of Borrower’s accounts, including deposit
accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Borrower
as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice
of the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events
Affecting Guarantor.  Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness. 
In the event of a death, Lender, at its option, may, but shall not be
required to, permit the Guarantor’s estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender, and,
in doing so, cure any Event of Default.

Adverse
Change.  A material adverse change occurs in Borrower’s
financial condition,  which causes Lender
to believe  the prospect of payment or
performance of the Loan is impaired.

Right to
Cure.  If any default, other than a default on
Indebtedness, is curable and if Borrower or Grantor, as the case may be, has
not been given a notice of a similar default within the preceding twelve (12)
months, it may be cured if Borrower or Grantor, as the case may be, after
receiving written notice from Lender demanding cure of such default:  (1) 
cure the default within twenty (20) days; or  (2)  if
the cure requires more than twenty (20) days, immediately initiate steps which
Lender deems in Lender’s sole discretion to be sufficient to cure the default
and thereafter continue and complete all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.

EFFECT OF AN
EVENT OF DEFAULT.  If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make further Loan Advances or disbursements), and, at Lender’s
option, all Indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the “Insolvency” subsection above, such acceleration
shall be automatic and not optional.  In
addition, Lender shall have all the rights and remedies provided in the Related
Documents or available at law, in equity, or otherwise.  Except as may be prohibited by applicable
law, all of Lender’s rights and remedies shall be cumulative and may be
exercised singularly or concurrently. 
Election by Lender to pursue any remedy shall not exclude pursuit of any
other remedy, and an election to make expenditures or to take action to perform
an obligation of Borrower or of any Grantor shall not affect Lender’s right to
declare a default and to exercise its rights and remedies.

ADDITIONAL
PROVISION.

Two million dollars ($2,000,000.00)
of the revolving line of credit can be converted to two term loans and is
subject to the following provisions.

A maximum one million dollars
($1,000,000.00) for expenses incurred to start up a new division and or
business unit of Borrower can be converted to a multiple advance loan for up to
two (2) years.  At the end of the
multiple advance period, the total amount advanced up to one million dollars
($1,000,000.00) will be converted to a fully amortized term loan for a period
of up to three (3) years.

A maximum one million dollars
($1,000,000.00) for the acquisition of other companies can be converted to a
fully amortized term loan for a period of up to three years.

Once the conversion of both
term loans has been executed, the amount available for borrowing hereunder
shall be permanently reduced by the total of such amount.

Once a formula base credit
line is in effect, Borrower shall deliver to Lender as of the end of each month
a Borrowing Base Certificate, calculation of Ineligible Accounts, detailed
Accounts Receivable Aging and Accounts Payable Aging and Work in Process Report
within forty five (45) days of each month end.

AMENDMENT,
RESTATEMENT AND REAFFIRMATION  This Business Loan Agreement (i) supersedes
all prior loan agreements executed by Borrower and Lender, including, but not
limited to, that certain Business Loan Agreement dated January 31, 2007
(collectively, the “Prior Instruments”), (ii) constitutes a comprehensive
amendment and complete restatement of the Prior Instruments, and (iii) is
executed, delivered and accepted in renewal, extension and modification but not
satisfaction or payment of the Prior Instruments.  Borrower hereby (a) agrees that all liens,
security interests and assignments against the collateral securing the indebtedness
shall not in any manner be waived, and (b) further reaffirms all agreements,
obligations, indebtedness, responsibilities, liens, and priority against the
collateral set forth in or granted under the Prior Instruments as therein
provided, except as may be restated, renewed, extended and modified by this
Agreement.

MISCELLANEOUS
PROVISIONS.  The following miscellaneous provisions are a
part of this Agreement:

Amendments.  This
Agreement, together with any Related Documents, constitutes the entire understanding
and agreement of the parties as to the matters set forth in this
Agreement.  No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or amendment.

 6
 

Attorneys’
Fees; Expenses.  Borrower agrees to pay upon demand all of
Lender’s reasonable costs and expenses, including Lender’s attorneys’ fees and
Lender’s legal expenses, incurred in connection with the enforcement of this
Agreement.  Lender may hire or pay
someone else to help enforce this Agreement, and Borrower shall pay the costs
and expenses of such enforcement.  Costs
and expenses include Lender’s attorneys’ fees and legal expenses whether or not
there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services.  Borrower also shall pay all
court costs and such additional fees as may be directed by the court.

Caption
Headings.  Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.

Consent to
Loan Participation.  Borrower agrees and consents to Lender’s sale
or transfer, whether now or later, of one or more participation interests in
the Loan to one or more purchasers, whether related or unrelated to
Lender.  Lender may provide, without any
limitation whatsoever, to any one or more purchasers, or potential purchasers,
any information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to privacy
Borrower may have with respect to such matters. 
Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests.  Borrower also
agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loan and will have
all the rights granted under the participation agreement or agreements
governing the sale of such participation interests.  Borrower further waives all rights of offset
or counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower’s obligation under the
Loan irrespective of the failure or insolvency of any holder of any interest in
the Loan.  Borrower further agrees that
the purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.

Governing
Law.  This Agreement will be governed by
federal law applicable to Lender and, to the extent not preempted by federal
law, the laws of the State of California without regard to its conflicts of law
provisions.  This Agreement has been accepted
by Lender in the State of California.

Choice of
Venue.  If there is a lawsuit, Borrower agrees upon
Lender’s request to submit to the jurisdiction of the courts of Orange County,
State of California.

No Waiver by
Lender.  Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and signed
by Lender.  No delay or omission on the
part of Lender in exercising any right shall operate as a waiver of such right
or any other right.  A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a waiver of
Lender’s right otherwise to demand strict compliance with that provision or any
other provision of this Agreement.  No
prior waiver by Lender, nor any course of dealing between Lender and Borrower,
or between Lender and any Grantor, shall constitute a waiver of any of Lender’s
rights or of any of Borrower’s or any Grantor’s obligations as to any future
transactions.  Whenever the consent of
Lender is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.

Notices.  Any
notice required to be given under this Agreement shall be given in writing, and
shall be effective when actually delivered, when actually received by
telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this
Agreement.  Any party may change its
address for notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change the party’s
address.  For notice purposes, Borrower
agrees to keep Lender informed at all times of Borrower’s current address.  Unless otherwise provided or required by law,
if there is more than one Borrower, any notice given by Lender to any Borrower
is deemed to be notice given to all Borrowers.

Severability.  If a
court of competent jurisdiction finds any provision of this Agreement to be
illegal, invalid, or unenforceable as to any circumstance, that finding shall
not make the offending provision illegal, invalid, or unenforceable as to any
other circumstance.  If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable.  If the offending
provision cannot be so modified, it shall be considered deleted from this
Agreement.  Unless otherwise required by
law, the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any
other provision of this Agreement.

Subsidiaries
and Affiliates of Borrower.  To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word “Borrower” as used in this
Agreement shall include all of Borrower’s subsidiaries and affiliates.  Notwithstanding the foregoing however, under
no circumstances shall this Agreement be construed to require Lender to make
any Loan or other financial accommodation to any of Borrower’s subsidiaries or
affiliates.

Successors
and Assigns.  All covenants and agreements by or on behalf
of Borrower contained in this Agreement or any Related Documents shall bind
Borrower’s successors and assigns and shall inure to the benefit of Lender and
its successors and assigns.  Borrower
shall not, however, have the right to assign Borrower’s rights under this
Agreement or any interest therein, without the prior written consent of Lender.

Survival of
Representations and Warranties.  Borrower understands and agrees
that in extending Loan Advances, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. 
Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants will survive the
extension of Loan Advances and delivery to Lender of the Related Documents,
shall be continuing in nature, shall be deemed made and redated by Borrower at
the time each Loan Advance is made,  and
shall remain in full force and effect until such time as Borrower’s
Indebtedness shall be paid in full, or until this Agreement shall be terminated
in the manner provided above, whichever is the last to occur.

Time is of
the Essence.  Time is of the essence in the performance of
this Agreement.

DEFINITIONS.  The
following capitalized words and terms shall have the following meanings when
used in this Agreement.  Unless
specifically stated to the contrary, all references to dollar amounts shall
mean amounts in lawful money of the United States of America.  Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require.  Words and terms not
otherwise defined in this Agreement shall have the meanings attributed to such
terms in the Uniform Commercial Code. 
Accounting words and terms not otherwise defined in this Agreement shall
have the meanings assigned to them in accordance with generally accepted
accounting principles as in effect on the date of this Agreement:

 7
 

Account.  The
word “Account” means a trade account, account receivable, other receivable, or other
right to payment for goods sold or services rendered owing to Borrower (or to a
third party grantor acceptable to Lender).

Account
Debtor.  The words “Account Debtor” mean the person or
entity obligated upon an Account.

Advance.  The
word “Advance” means a disbursement of Loan funds made, or to be made, to
Borrower or on Borrower’s behalf under the terms and conditions of this
Agreement.

Agreement.  The
word “Agreement” means this Business Loan Agreement (Asset Based), as this
Business Loan Agreement (Asset Based) may be amended or modified from time to
time, together with all exhibits and schedules attached to this Business Loan
Agreement (Asset Based) from time to time.

Borrower.  The
word “Borrower” means Willdan Group, Inc. and includes all co-signers and
co-makers signing the Note and all their successors and assigns.

Borrowing
Base.  The words “Borrowing Base” mean that subject
to the terms and conditions hereof, herein described credit facility will
convert to a formula based revolving line of credit when line of credit usage
exceeds six million dollars ($6,000,000.00). 
All advances under the formula based line of credit provision shall be
limited to eighty percent (80%) of Eligible Receivables and twenty-five percent
(25%) of unbilled work in process up to sixty (60) days old or eight million
dollars, ($8,000,000.00) whichever is lower.

Business
Day.  The words “Business Day” mean a day on which
commercial banks are open in the State of California.

Collateral.  The
word “Collateral” means all property and assets granted as collateral security
for a Loan, whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in the
form of a security interest, mortgage, collateral mortgage, deed of trust,
assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage,
chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt,
lien, charge, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise. 
The word Collateral also includes without limitation all collateral
described in the Collateral section of this Agreement.  Collateral shall not include leased or rented
property.

Eligible
Accounts.  The words “Eligible Accounts” mean at any
time, all of Borrower’s Accounts which contain selling terms and conditions
acceptable to Lender.  The net amount of
any Eligible Account against which Borrower may borrow shall exclude all
returns, discounts, credits, and offsets of any nature.  Unless otherwise agreed to by Lender in
writing, Eligible Accounts do not include:

(1)  Accounts with respect to which the Account
Debtor is employee or agent of Borrower.

(2)  Accounts with respect to which the Account
Debtor is a subsidiary of, or affiliated with 
Borrower or its shareholders, officers, or directors.

(3)  Accounts with respect to which goods are
placed on consignment, guaranteed sale, or other terms by reason of which the
payment by the Account Debtor may be conditional.

(4)  Accounts with respect to which the Account
Debtor is not a resident of the United States, except to the extent such
Accounts are supported by insurance, bonds or other assurances satisfactory to
Lender.

(5)  Accounts with respect to which Borrower is or
may become liable to the Account Debtor for goods sold or services rendered by
the Account Debtor to Borrower.

(6)  Accounts which are subject to dispute,
counterclaim, or setoff.

(7)  Accounts with respect to which the goods have
not been shipped or delivered, or the services have not been rendered, to the
Account Debtor.

(8)  Accounts with respect to which Lender, in its
sole discretion, deems the creditworthiness or financial condition of the
Account Debtor to be unsatisfactory.

(9)  Accounts of any Account Debtor who has filed
or has had filed against it a petition in bankruptcy or an application for
relief under any provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian, or
receiver for the assets of such Account Debtor; or who has made an assignment
for the benefit of creditors or has become insolvent or fails generally to pay
its debts (including its payrolls) as such debts become due.

(10)  Accounts which have not been paid in full
within one hundred twenty one (121) days from
the invoice date.  The entire balance of
any Account of any single Account Debtor will be ineligible whenever the portion
of the Account which has not been paid within one
hundred twenty one (121) days from the invoice date is in excess of 20.000% of the total amount outstanding on
the Account.

(11)  That portion of the Accounts of any single
Account Debtor which exceeds 20.000% of
all of Borrower’s Accounts.

(12)  Contra Accounts.

Environmental
Laws.  The words “Environmental Laws” mean any and
all state, federal and local statutes, regulations and ordinances relating to
the protection of human health or the environment, including without limitation
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state or federal laws, rules,
or regulations adopted pursuant thereto.

Event of
Default.  The words “Event of Default” mean any of the
events of default set forth in this Agreement in the default section of this
Agreement.

Expiration Date.  The
words “Expiration Date” mean the date of termination of Lender’s commitment to
lend under this Agreement.

GAAP.  The
word “GAAP” means generally accepted accounting principles.

Grantor.  The
word “Grantor” means each and all of the persons or entities granting a
Security Interest in any Collateral for the Loan, including without limitation
all Borrowers granting such a Security Interest.

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Guarantor.  The
word “Guarantor” means any guarantor, surety, or accommodation party of any or
all of the Loan.

Guaranty.  The
word “Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note.

Hazardous
Substances.  The words “Hazardous Substances” mean
materials that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or potential hazard
to human health or the environment when improperly used, treated, stored,
disposed of, generated, manufactured, transported or otherwise handled.  The words “Hazardous Substances” are used in
their very broadest sense and include without limitation any and all hazardous
or toxic substances, materials or waste as defined by or listed under the
Environmental Laws.  The term “Hazardous
Substances” also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.

Indebtedness.  The
word “Indebtedness” means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other
indebtedness and costs and expenses for which Borrower is responsible under
this Agreement or under any of the Related Documents.

Lender.  The
word “Lender” means Orange County Business Bank, its successors and assigns.

Loan.  The
word “Loan” means any and all loans and financial accommodations from Lender to
Borrower whether now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.

Note.  The
word “Note” means the Note executed by Willdan Group, Inc. in the principal
amount of $8,000,000.00  dated January
31, 2007 together with all renewals of, extensions of, modifications of, refinancings
of, consolidations of, and substitutions for the note or credit agreement.

Permitted
Liens.  The words “Permitted Liens” mean  (1) 
liens and security interests securing Indebtedness owed by Borrower to
Lender;  (2)  liens for taxes, assessments, or similar
charges either not yet due or being contested in good faith;  (3) 
liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent;  (4)  purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this
Agreement titled “Indebtedness and Liens”; 
(5)  liens and security interests
which, as of the date of this Agreement, have been disclosed to and approved by
the Lender in writing; and  (6)  those liens and security interests which in
the aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower’s assets.

Primary
Credit Facility.  The words “Primary Credit Facility” mean the
credit facility described in the Line of Credit section of this Agreement.

Related
Documents.  The words “Related Documents” mean all
promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the Loan.

Security
Agreement.  The words “Security Agreement” mean and
include without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.

Security
Interest.  The words “Security Interest” mean, without
limitation, any and all types of collateral security, present and future,
whether in the form of a lien, charge, encumbrance, mortgage, deed of trust,
security deed, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever whether created by law, contract, or otherwise.

BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT
(ASSET BASED) AND BORROWER AGREES TO ITS TERMS. 
THIS BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED August 16, 2007.

BORROWER:

	
  WILLDAN GROUP, INC.

  
	
   

  
	
  By:

  	
  /s/ Win S. Westfall

  	
   

  
	
   

  	
  Win S. Westfall, Chairman of
  the Board of

  Willdan Group, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDER:

  
	
   

  
	
   

  
	
  ORANGE COUNTY BUSINESS BANK

  
	
   

  
	
  By:

  	
  /s/ Nic Goeres

  	
   

  
	
   

  	
  Authorized Signer

  

 

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