Document:

Exhibit 10.1

	
  

  	
  Orange County

  BUSINESS BANK

  

 

BUSINESS
LOAN AGREEMENT (ASSET BASED)

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call/Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $8,000,000.00

  	
   

  	
  01-31-2007

  	
   

  	
  07-31-2007

  	
   

  	
  10176244

  	
   

  	
  4A/430

  	
   

  	
   

  	
   

  	
  NG1

  	
   

  	
  /s/ NJG

  

 

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.

  	
  Lender:

  	
  Orange County Business Bank

  
	
   

  	
  2401 East Katella Avenue, Suite 300

  	
   

  	
  Main Office

  
	
   

  	
  Anaheim, CA 92806

  	
   

  	
  4675 MacArthur Court

  
	
   

  	
   

  	
   

  	
  Suite 100

  Newport Beach, CA 92660

  

 

THIS BUSINESS
LOAN AGREEMENT (ASSET BASED) dated January 31, 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 January 31, 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; and Kate Mai Nguyen. 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 annual tax returns, including all K-1
schedules and all applicable statements and schedules, no later than thirty
(30) days after filing or in the case of extensions (copies also to be provided),
no later than six (6) months after first filing due date. Said tax returns
shall be the consolidated
returns of Willdan Group, Inc., including but not limited to all corporate
Guarantors of herein described credit facility.

Borrower shall submit monthly accounts receivable agings,
accounts payable agings and work in process reports within forty five (45) days
of each
month end until such time that credit facility exceeds six million dollars
($6,000,000.00) and follows the formula based reporting covenants.

ADDITIONAL PROVISIONS:

Borrower agrees to maintain its principal depository
relationship with 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 $16,000,000.00. “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 my Insiders, that do not provide for a repayment schedule.

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

  	
   

  	
  Unlimited

  
	
  Arroyo
  Geotechnical

  	
   

  	
  Unlimited

  
	
  MuniFinancial

  	
   

  	
  Unlimited

  
	
  American
  Homeland Solutions

  	
   

  	
  Unlimited

  

 

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.

Additional Financial Restrictions. Unless otherwise agreed
to in writing by Lender:

Acquisitions
of other companies are not permitted.

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. (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 other than in the ordinary
course of business.

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.

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.

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.

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.

 6
 

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:

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.

 7
 

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.

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.

 8
 

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 and
includes without limitation all of Borrower’s promissory notes and/or credit
agreements evidencing Borrower’s loan obligations in favor of Lender, together
with all renewals of, extensions of, modifications of, refinancing of,
consolidations of and substitutions for promissory notes or credit agreements.

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 JANUARY 31, 2007.

	
  BORROWER:

  
	
   

  
	
   

  
	
  WILLDAN GROUP INC.

  
	
  By :

  	
  /s/ Win S. Westfall

  	
   

  
	
   

  	
  Win S. Westfall, President/CEO of Willdan

  
	
   

  	
  Group, Inc.

  
				

 

	
  LENDER:

  
	
   

  
	
   

  
	
  ORANGE
  COUNTY BUSINESS

  
	
  By :

  	
   /s/ Nic
  Goeres

  	
   

  
	
   

  	
  Authorized Signer

  
				

 

 9Exhibit 10.2

	
  

  	
  Orange County

  BUSINESS BANK

  

 

PROMISSORY
NOTE

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call/Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $8,000,000.00

  	
   

  	
  01-31-2007

  	
   

  	
  07-31-2007

  	
   

  	
  10176244

  	
   

  	
  4A/430

  	
   

  	
   

  	
   

  	
  NG1

  	
   

  	
  /s/ NJG

  

 

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.

  	
   

  	
  Lender:

  	
   

  	
  Orange County Business Bank

  
	
   

  	
   

  	
   

  2401 East
  Katella Avenue, Suite 300

  	
   

  	
   

  	
   

  	
  Main
  Office

  
	
   

  	
   

  	
  Anaheim,
  CA 92806

  	
   

  	
   

  	
   

  	
  4675
  MacArthur Court

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Suite 100

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Newport
  Beach, CA 92660

  

 

	
  Principal Amount: $8,000,000.00

  	
  Initial Rate: 8.500%

  	
  Date of Note: January 31, 2007

  

 

PROMISE TO PAY. Willdan Group, Inc.
(“Borrower”) promises to pay to Orange County Business Bank (“Lender”), or
order, in lawful money of the United States of America, the principal amount of
Eight Million & 00/100 Dollars ($8,000,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding principal balance
of each advance. Interest shall be calculated from the date of each advance
until repayment of each advance.

PAYMENT. Borrower will pay this loan
in full immediately upon Lender’s demand. If no demand is made, Borrower will
pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on July 31, 2007. In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date,
beginning February 28, 2007, with all subsequent interest payments to be due on
the last day of each month after that. Unless otherwise agreed or required by
applicable law, payments will be applied first to any accrued unpaid interest;
then to principal; and then to any late charges. The annual interest rate for
this Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an independent index which is the
Wall Street Journal Prime Rate as quoted in the Western Edition of the Wall
Street Journal (the “Index”). The Index is not necessarily the lowest rate
charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender will tell
Borrower the current Index rate upon Borrower’s request. The interest rate
change will not occur more often than each day. Borrower understands that
Lender may make loans based on other rates as well. The Index currently is 8.250%. The interest rate to be applied
to the unpaid principal balance during this Note will be at a rate of 0.250
percentage points over the Index, resulting in an initial rate of 8.500%.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE.
Borrower agrees that
all loan fees and other prepaid finance charges are earned fully as of the date
of the loan and will not be subject to refund upon early payment (whether
voluntary or as a result of default), except as otherwise required by law. In
any event, even upon full prepayment of this Note, Borrower understands that
Lender is entitled to a minimum interest
charge of $100.00. Other than Borrower’s obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of the amount owed earlier
than it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments of
accrued unpaid interest. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked “paid in full”,
“without recourse”, or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender’s rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or
other payment instrument that indicates that the payment constitutes “payment
in full” of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Orange County Business Bank, 4675 MacArthur Court Newport Beach,
CA 92660.

LATE CHARGE. If a payment is 10 days or more late, Borrower
will be charged 5.000% of the regularly
scheduled payment or $5.00, whichever is greater.

INTEREST AFTER DEFAULT. Upon default, the interest rate on this Note
shall, if permitted under applicable law, immediately increase by adding a
6.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin
shall also apply to each succeeding interest rate change that would have
applied had there been no default.

DEFAULT. Each of the following shall constitute an event of default (“Event of
Default”) under this Note:

Payment Default. Borrower fails to make any payment when due under this Note 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 Note 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 Note or
the related documents is false or misleading in any material respect, either
now or at the time made or furnished.

 

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.

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 evidenced by this Note. 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 this
Note is impaired.

Cure Provisions. If any default, other than a default in payment is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured if Borrower, after
receiving written notice from Lender demanding cure of such default: (1) cures
the default within twenty (20) days; or (2) if the cure requires more than
twenty (20) days, immediately initiates steps which Lender deems in Lender’s
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

LENDER’S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance under this Note and all accrued unpaid interest
immediately. due, and then Borrower will pay that amount.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower will pay reasonable
attorney fees. This includes, subject to any limits under applicable law,
Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a
lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction), and
appeals. Borrower also will pay any court costs, in addition to all other sums
provided by law.

GOVERNING LAW. This Note 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 Note 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.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $45.00 if
Borrower makes a payment on
Borrower’s loan and the check or preauthorized charge with which Borrower pays
is later dishonored.

COLLATERAL. Borrower acknowledges this Note is secured by
the following collateral described in the security instrument listed herein:
inventory, chattel paper, accounts, equipment and general intangibles described
in a Commercial Security Agreement dated January 31, 2007.

LINE OF CREDIT. This Note evidences a revolving line of
credit. Advances under this Note, as well as directions for payment from
Borrower’s accounts, may be requested orally or in writing by Borrower or as
provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. 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; and Kate Mai Nguyen. In addition to requesting advances
orally or in writing, advances may be requested via online banking or loan
sweep. Borrower agrees to be liable for all sums either: (A)
advanced in accordance with the instructions of an authorized person or (B)
credited to any of Borrower’s accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender’s internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Note if: (A)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note; (B) Borrower or any
guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor’s
guarantee of this Note or any other loan with Lender; or (D) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.

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.

 2
 

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon
Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and
assigns.

NOTIFY US OF INACCURATE INFORMATION
WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate
information about your account(s) to a consumer reporting agency. Your written notice
describing the specific inaccuracy(ies) should be sent to us at the following
address: Orange County Business Bank 4675 MacArthur Court, Suite 100 Newport
Beach, CA 92660.

GENERAL PROVISIONS. This Note is payable on demand. The inclusion
of specific default provisions or rights of Lender shall not preclude Lender’s
right to declare payment of this Note on its demand. If any part of this Note
cannot be enforced, this fact will not affect the rest of the Note. Lender may
delay or forgo enforcing any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender’s security interest in the collateral;
and take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER
READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE
INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

	
  WILLDAN GROUP, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Win S. Westfall

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Win S. Westfall, President/CEO of Willdan

  	
   

  	
   

  
	
   

  	
  Group, Inc.

  	
   

  	
   

  
						

 

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