Summary of ENGLOBAL CORP - Yahoo! Finance

Entry into a Material Definitive Agreement, Regulation FD Disclosure, Financial Sta

Item 1.01. Entry into a Material Definitive Agreement.

On September 27, 2012 (the "Effective Date"), ENGlobal Corporation, a Nevada corporation (the "Company"), ENGlobal U.S., Inc., a Texas corporation ("ENGlobal US"), ENGlobal International, Inc., a corporation organized under the BVI Business Companies Act of 2004 ("ENGlobal International"), ENGlobal Government Services, Inc., a Texas corporation ("ENGlobal Government" and, together with the Company, ENGlobal US and ENGlobal International, the "Borrowers"), entered into the First Amendment to Revolving Credit and Security Agreement and Forbearance Agreement (the "First Amendment"), with PNC Bank, National Association, as administrative agent ("Agent") for the lenders (the "Lenders").

Under the terms of the First Amendment, the Lenders agreed to forbear, during the Forbearance Period (as defined below), from exercising their rights and remedies, under the Revolving Credit and Security Agreement dated May 30, 2012 (the "Credit Agreement"), among the Borrowers and the Lenders in respect of the Subject Events of Default (as defined below); provided, however, that Agent may, but is not obligated to, collect the accounts and proceeds of other collateral under the Credit Agreement and apply such collections and proceeds to the obligations under the Credit Agreement and impose the default rate of interest under the Credit Agreement. The "Forbearance Period" commenced on the Effective Date and ends on the earlier to occur of (a) 5:00 p.m. (Dallas, Texas time) on October 31, 2012; or (b) the date that any forbearance default (which includes certain events of bankruptcy and any default or event of default under the Credit Agreement other than the Subject Events of Default) occurs. The "Subject Events of Default" include the following existing events of default and anticipated additional events of default under the Credit Agreement: (i) failure to comply with the Tangible Net Worth and Fixed Charge Coverage Ratio financial covenants for the fiscal quarter ended June 30, 2012, (ii) failure to maintain Average Excess Availability for the month ended August 31, 2012, (iii) failure to comply with the Borrowing Base Certificate delivery requirements for the months ending May 31, 2012 and June 30, 2012, (iv) failure to comply with the monthly financial statement delivery requirements for the month ending July 31, 2012, (v) failure to deliver to Agent foreign good standing certificate for ENGlobal US issued by the Secretary of State or other appropriate office of the State of Illinois, (vi) failure to comply with the Credit Agreement as a result of cross default under the EX-IM Transaction Specific Credit Agreement dated July 13, 2011, by and between ENGlobal U.S., Inc. and Wells Fargo Bank, National Association; (vii) failure to comply with the Tangible Net Worth and Fixed Charge Coverage Ratio financial covenants for the fiscal quarter ending September 30, 2012, (viii) failure to maintain Average Excess Availability throughout the Forbearance Period, and (ix) failure to deliver to Agent a foreign good standing certificate for ENGlobal US issued by the Secretary of State or other appropriate office of the State of Illinois before October 1, 2012.

In addition, under the terms of the First Amendment, the Borrowers have agreed to retain, for the duration of the Forbearance Period, a turnaround consultant (the "Consultant") acceptable to Agent and the Lenders, and with a scope of duties acceptable to Agent and the Lenders. The Consultant is to be retained to provide a turnaround or exit plan, in form and substance satisfactory to Agent, by October 15, 2012 (or such later date as may be permitted by Agent in its sole discretion) and services as are reasonably necessary to facilitate Borrowers' ability to operate in compliance with the terms of the Credit Agreement.

In addition, under the terms of the First Amendment, during the Forbearance Period and subject to the other conditions set forth in the Credit Agreement and the First Amendment, Lenders may, in their sole and absolute discretion, make revolving advances to Borrowers in such portions and at the times set forth in the Credit Agreement, which advances will bear interest at the default rate of interest. In consideration of the First Amendment, Borrowers agreed to pay the Lenders an amendment fee of $35,000.