NOTE 5 - LINE OF CREDIT AND LETTER OF CREDIT FACILITIES

6 Months Ended

Jun. 29, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 5 – LINE OF CREDIT AND LETTER OF CREDIT FACILITIES

Line of Credit Facility

On May 29, 2012, the Company entered into a credit facility with PNC Bank, National Association, as administrative agent (“PNC Credit Facility”) for the lenders (the "Lenders") pursuant to which the Lenders agreed to extend credit to the Company in the form of loans (each a "Loan" and collectively, the "Loans") on a revolving basis of up to $35.0 million (the "Commitment"). As of September 29, 2012 and thereafter, the Company has not been in compliance with the certain financial covenants of the PNC Credit Facility.

On September 27, 2012, the Company entered into the First Amendment to Revolving Credit and Security Agreement and Forbearance Agreement (the "Forbearance Agreement"), with the Lenders regarding the PNC Credit Facility.  Under the terms of the Forbearance Agreement, the Lenders agreed to forbear, during the Forbearance Period (as defined below), from exercising their rights and remedies, under the PNC Credit Facility, with respect to specified events of default. The "Forbearance Period" commenced on September 27, 2012 and ended on October 31, 2012.  On October 30, 2012, the Forbearance Period was extended to November 15, 2012.  On November 14, 2012, the Forbearance Period was extended to November 30, 2012.

On December 18, 2012, the Company entered into the Second Amendment to Revolving Credit and Security Agreement, Waiver and Forbearance Extension (the “Second Amendment”).  Under the terms of the Second Amendment, the Lenders agreed to continue to forbear, during the Second Forbearance Period, from exercising their rights and remedies, under the PNC Credit Facility in respect of the specified 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 “Second Forbearance Period” commenced on September 27, 2012 and ended on April 30, 2013.

As of the date of this report, the Company continues to operate while negotiating the terms of an amended revolving credit facility.  We anticipate that the net proceeds from our previously announced transaction to sell substantially all of our Gulf Coast engineering and in-plant operations will be used to repay advances under the existing PNC Credit Facility and for working capital. 

Letter of Credit Facility

In July 2011, with the support of Wells Fargo's Global Banking Group, ENGlobal and the Export-Import Bank of the United States (“Ex-Im Bank”) entered into a separate $9.5 million letter of credit facility (the “Ex-Im Bank Facility”) to support the Company's Caspian Pipeline Consortium (CPC) project.  Under the terms of this agreement, the Company may issue letters of credit to CPC for its performance under the CPC project.  The Company was required to collateralize letters of credit outstanding under the Ex-Im Bank Facility with cash or eligible Russian receivables resulting from the CPC project.  On June 17, 2013, the letters of credit were allowed to expire.  The Company has proposed an alternative option to modify terms of future retention amounts in lieu of the letters of credit.  As a result of the expiration of the letters of credit, $6.1 million of cash collateral was released and applied to the PNC Credit Facility.