Item 1.01 Entry into a Material Definitive Agreement.
On June 16, 2016, but effective May 29, 2016,
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
”), ENGlobal International, Inc., a corporation
organized under the BVI Business Companies Act of 2004 (“
ENGlobal International
”), and ENGlobal Emerging
Markets, Inc., a Texas corporation (“
ENGlobal Emerging Markets
” and, together with ENGlobal International,
the “
Guarantors
” and, together with the Borrowers, the “
Loan Parties
”), entered
into the Second Amendment to the Loan and Security Agreement (the “
Second Amendment
”), which amends the
Loan and Security Agreement dated as of September 16, 2014 (as previously amended, the “
Loan Agreement
”),
with Regions Bank, an Alabama bank (the “
Lender
”).
Pursuant to the Second Amendment, the Lender
agreed, among other things, to amend the following: (1) commencing with the fiscal month ending April 30, 2016, and continuing
through and including the fiscal month ending December 31, 2016 only, compliance with the fixed charge coverage ratio financial
covenant is suspended; (2) beginning on the effective date of the Second Amendment and continuing until December 31, 2016, Borrowers
must (a) reduce Working Capital Obligations, as that term is defined in the Loan Agreement, to zero and thereafter maintain all
such amounts at zero, except (i) as may be necessary to accommodate for intraday cash management activities, and (ii) for
up to $500,000, in aggregate amount, of all undrawn and unreimbursed amounts under all outstanding letters of credit issued by
Lender under the Loan Agreement at any one time; and (3) Borrowers must maintain with Lender unrestricted cash in a Collections
Account, as defined in the Loan Agreement, equal to not less than $5,000,000. On January 1, 2017, and at all times thereafter,
Borrowers must resume compliance with the fixed charge coverage ratio financial covenant under the Loan Agreement.
The foregoing description of the Second Amendment
is not complete and is qualified by reference to the complete document, which is attached hereto as Exhibit 10.1 to this Current
Report on Form 8-K and is incorporated herein by reference.