ENGlobal Corporation (NASDAQ:ENG) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement
ENGlobal Corporation (NASDAQ:ENG) Files An 8-K Entry into a Material Definitive Agreement
On May 21, 2020 (the “Closing Date”), ENGlobal Corporation, a Nevada corporation (the “Company”), ENGlobal U.S., Inc., a Texas corporation (“ENGlobal US”), ENGlobal Government Services, Inc., a Texas corporation (“ENGlobal Government” and, together with the Company and ENGlobal US, the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) with Pacific Western Bank dba Pacific Western Business Finance, a California state-chartered bank (the “Lender”), to which the Lender agreed to extend credit to the Borrowers in the form of revolving loans (each a “Loan” and collectively, the “Loans”) in the aggregate amount of up to $6.0 million (the “Maximum Credit Limit”).
Set forth below are certain of the material terms of the Loan Agreement:
Credit Limit:Lender will not be obligated to make any Loan if doing so would, after giving effect thereto, cause the outstanding amount of all indebtedness under the Loan Agreement to exceed the credit limit.The credit limit is an amount equal to the lesser of (a) the Maximum Credit Limit and (b) the sum of (i) 85% of the Borrowers’ Eligible Accounts (as defined in the Loan Agreement), plus (ii)the lesser of (A)75% of the Borrowers’ Eligible Unbilled Accounts (as defined in the Loan Agreement), or (B)$3,000,000 plus (iii)the lesser of (A)20% of Borrowers’ Eligible Fixed Price Accounts, or (B)$250,000.
Interest:Any Loans will bear interest at a rate per annum equal to the Prime rate (defined as the rate announced as the “prime rate” or “bank prime rate” in the Western Edition of the Wall Street Journal) plus 2.0%; provided that interest will not be less than $7,500 per month.
Collateral: Lender receives a first priority lien on all assets of the Borrowers, including: accounts receivable, inventory, equipment, deposit accounts, general intangibles and investment property.
Maturity:The maturity date is May 20, 2023 and shall be automatically extended for additional periods of one-year each, if written notice of termination is not given by one party to the other at least thirty days prior to the maturity date.
Loan Fee: The Borrowers will pay to Lender a loan fee of 1.00% of the Maximum Credit Limit at the time of funding and annually thereafter on the anniversary date of the initial funding.
Termination Fee: In the event the Borrowers terminate the Loan Agreement prior to the maturity date, the Borrowers will pay to Lender a termination fee of (i) 2.00% of the Maximum Credit Limit, if the termination occurs on or prior to the first anniversary of the Closing Date, (ii) 1.00% of the Maximum Credit Limit, if the termination occurs after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date and (iii) 0.05% of the Maximum Credit Limit, if the termination occurs after the second anniversary of the Closing Date.
Covenants: The Loan Agreement requires the Borrowers to comply with certain customary affirmative covenants, and negative covenants that, among other things, restrict, subject to certain exceptions, the ability of the Borrowers to engage in mergers, acquisitions or other transactions outside of the ordinary course of business, make loans or investments, incur indebtedness, pay dividends or repurchase stock, or engage in affiliate transactions. The Loan Agreement does not require the Borrowers to comply with any financial covenants.
The foregoing description of the Loan Agreement is included to provide you with information regarding its terms. It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Loan Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is included with this Current Report on Form 8-K:
ENGLOBAL CORP Exhibit
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About ENGlobal Corporation (NASDAQ:ENG)
ENGlobal Corporation is engaged in providing engineering and professional services to the energy industry. The Company operates through two segments: Engineering, Procurement and Construction Management (EPCM), and Automation. The EPCM segment provides services relating to the development, management and execution of projects requiring professional engineering and related project services to the energy industry throughout the United States. The EPCM segment includes the government services group, which provides engineering, design, installation and operation and maintenance of various government, public sector and international facilities. The Automation segment provides services related to the design, fabrication and implementation of process distributed control and analyzer systems, advanced automation, information technology and electrical projects to the upstream and downstream sectors throughout the United States, as well as a specific project in Central Asia.
