FOURTH AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
RCM Technologies, Inc. and All of Its Subsidiaries
with
Citizens Bank of Pennsylvania, as Administrative Agent and Arranger
And
Each of the Financial Institutions Now and Hereafter
Shown on the Signature Pages Hereof as Lenders
Dated: As of July 27, 2004
5
FOURTH AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This FOURTH AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT ("Amendment") is dated as of July 27, 2004, by RCM
TECHNOLOGIES, INC. ("RCM"), and ALL OF ITS SUBSIDIARIES (collectively referred
to as "Borrower"), CITIZENS BANK OF PENNSYLVANIA (formerly known as Mellon Bank,
N.A.), a Pennsylvania state chartered bank, in its capacity as administrative
agent and arranger (the "Agent"), and CITIZENS BANK OF PENNSYLVANIA (formerly
known as Mellon Bank, N.A.), in its capacity as Lender ("Citizens"), and
SUNTRUST BANK (formerly known as SUNTRUST BANK ATLANTA), in its capacity as
documentation agent and lender ("Suntrust"), (Citizens and SunTrust individually
each being a "Lender" and collectively referred to as "Lenders").
BACKGROUND
A. Pursuant to the terms of a certain Amended and Restated Loan and Security
Agreement dated as of May 31, 2002, between Borrower, Lenders and Fleet National
Bank, as amended by a certain Amendment and Modification to Amended and Restated
Loan and Security Agreement dated as of December 30, 2002, as further amended by
a certain Second Amendment and Modification to Amended and Restated Loan and
Security Agreement dated as of February 26, 2003, and a certain Third Amendment
and Modification to Amended and Restated Loan and Security Agreement dated as of
October 1, 2003 (collectively, the " Loan Agreement"), Lenders have made
available to Borrower a revolving line of credit in the aggregate amount of
$25,000,000.00 (the "Revolving Credit").
B. The Revolving Credit is evidenced by certain Third Amended and Restated
Revolving Credit Notes dated October 1, 2003, from Borrower to Lenders in the
aggregate amount of $25,000,000.00 ("Revolving Credit Notes").
C. Borrower has requested that Lenders extend the term of the Revolving Credit
Notes and modify certain covenants contained in the Loan Agreement, and Lender
has agreed to extend the term of the Revolving Credit Notes and modify those
certain covenants, subject to the terms and conditions of this Agreement.
D. All capitalized terms used herein without further definition shall have the
respective meaning set forth in the Loan Agreement and all other Loan Documents.
NOW, THEREFORE, with the foregoing Background incorporated by reference
and intending to be legally bound hereby, the parties agree as follows:
1. Loan Agreement. The following amendments and modifications shall be made to
the Loan Agreement and shall be effective upon execution hereof:
a. Certain definitions contained in Section 1.1 of the Loan Agreement shall be
amended and/or added as follows:
(1) Additional Net Restructuring Charge shall be deleted in its entirety.
(2) New Acquisition Consideration Payment shall be deleted in its entirety.
(3) Minimum Tangible Net Worth shall be deleted in its entirety and replaced as
follows:
Minimum Tangible Net Worth - Borrower's
consolidated Tangible Net Worth shall be
$15,000,000 as of June 30, 2004, plus fifty
percent (50%) of quarterly Net Income
thereafter (with no credit for losses).
(4) A new definition of "Restricted Stock" shall be added as follows:
Restricted Stock - (i) vested stock in
Borrower issued to employees or directors of
the Borrower, and (ii) all cash bonuses paid
to such employees or directors to the extent
they do not exceed seventy percent (70%) of
the value of such vested stock at the time
such stock is vested provided Borrower
reasonably anticipates that Borrower will
fully realize the tax benefits associated
with the issuance of such vested stock and
cash bonuses within twelve (12) months from
date such stock is issued and such cash
bonuses are paid, if any.
(5) A new definition of "Non-Cash Charges" shall be added as follows:
Non-Cash Charges - The sum of all charges
arising out of (i) any required expensing of
stock options issued by the Borrower, (ii)
the issuance of any Restricted Stock to
employees or directors of the Borrower,
(iii) write-offs of good will and (iv) any
other non-cash charges approved by the
Majority Lenders, which approval will not be
unreasonably withheld.
(6) A new definition of "Kopyt Cash Payment" shall be added as follows:
Kopyt Cash Payment - a lump sum cash payment
made to Leon Kopyt by the Borrower solely as
a result of his voluntary resignation as an
officer and employee of the Borrower.
(7) Subsequent Additional Net Restructing Charge shall be deleted in its
entirety.
(8) EBITDA shall be deleted in its entirety and replaced as follows:
EBITDA - The sum of (i) Net Income before
interest, taxes, depreciation and
amortization, (ii) Non-Cash Charges, and
(iii) the net loss if any (expressed as a
positive number) arising solely from
Permitted Asset or Stock Sales up to an
amount, which when added to other net losses
previously recognized under this
subparagraph (iii) does not exceed
$5,000,000.00 in the aggregate.
(9) Revolving Credit Maturity Date shall be deleted in its entirety and replaced
as follows
Revolving Credit Maturity Date -- August 19,
2006.
b. The first sentence of Section 2.5(b) of the Loan Agreement is hereby amended
and restated in its entirety as follows:
(b) Unused Line Fee. So long as the Revolving Credit
Facility is outstanding and has
not been terminated pursuant to the terms hereof, the Borrower shall
unconditionally pay to the Agent, for the benefit of the Lenders in accordance
with their Pro Rata Percentages, a non-refundable fee (the "Unused Line Fee")
based on the Borrower's financial condition, tested quarterly, as follows:
Total Funded Unused Line Fee
------------ ---------------
Debt to EBITDA
--------------
>2.25x 30.0 bp
-
>1.75x and <2.25x 25.0 bp
-
> 1.25x and <1.75x 20.0 bp
-
<1.25x 15.0 bp
c. The first sentence of Section 2.7 of the Loan Agreement is hereby amended and
restated in its entirety as follows:
2.7 Use of Proceeds. The extensions of credit
hereunder and the proceeds of the Loans
---------------
shall be used by the Borrower solely for (i) the financing of Acquisitions
(subject to the conditions set forth below), (ii) to refinance all existing
indebtedness owed by the Borrower pursuant to the Original Loan Agreement, (iii)
the repurchase of RCM's outstanding common stock (provided that the aggregate
amount of proceeds of the Loans used for such repurchases during the term of the
Loans does not exceed $5,000,000.00, in the aggregate), and (iv) for working
capital and other general corporate purposes.
d. The first four lines of Section 6.9 of the Loan Agreement is hereby amended
and restated in its entirety as follows:
6.9 Financial Covenants: RCM shall maintain
and comply with the following financial
-------------------
covenants (calculated on the basis of GAAP), to be tested quarterly on a
consolidated basis (The covenants set forth in Sections 6.9(a) and 6.9(c) below
will be based on an annualized EBITDA, calculated on a rolling two quarters
times two basis, provided that (x) if a charge for the Kopyt Payment is included
in EBITDA for such two quarters, such charge will be taken into account once and
will not be multiplied by two, and (y) trailing unadjusted EBITDA of all
Acquisitions will be included):
e. Exhibit 6.11 of the Loan Agreement is hereby amended and restated in its
entirety in the form of Exhibit 6.11 attached hereto.
f. Section 6.9(e) of the Loan Agreement shall be deleted in its entirety.
g. If, during the term of the Revolving Credit Facility, the Kopyt Cash Payment
is made, then solely for purposes of determining the "Applicable Prime Rate
Margin", the "Applicable LIBOR Rate Margin", the "Letter of Credit Applicable
Margin" and the "Unused Line Fee" under the Loan Agreement, the Kopyt Cash
Payment shall not be treated as a reduction to Net Income in determining EBITDA
for the applicable rolling four quarter period during which such Kopyt Cash
Payment is made. The Borrower hereby acknowledges that the provisions of this
Paragraph 1(g) are not intended to affect any other provision of the Loan
Agreement.
2. Representations and Warranties. Borrower warrants and represents to Lenders
that:
a. Prior Representations. By execution of this Amendment, Borrower reconfirms
that all warranties and representations made to Lenders under the Loan Agreement
and the other Loan Documents are true and correct in all material respects as of
the date hereof (other than representations previously made as of a specific
time), all of which shall be deemed continuing until all of the Obligations to
Lenders are paid and satisfied in full. Lenders acknowledge that Borrower has
notified Lenders of various lawsuits and claims referred in Note 12 to
Borrower's financial statements included in Borrower's Form 10-Q for the period
ending March 30, 2004. In the opinion of management and based upon the advice of
counsel, the Borrower has meritorious defenses to the lawsuits and claims;
however the Borrower expresses no opinion herein with respect to the Meyers
Suit. However, if material adverse determinations on either the lawsuits or
claims were to be rendered, such determinations will have a material adverse
impact on the results of operations in the period of the respective charges as
well as a material adverse impact on the financial position and liquidity of the
Borrower.
b. Authorization. The execution and delivery by Borrower of this Amendment and
the performance by Borrower of the transactions herein contemplated (i) are and
will be within its powers and (ii) are not and will not be in contravention of
any order of court or other agency of government, of law or of any indenture,
agreement or undertaking to which Borrower is a party or by which the property
of Borrower is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or undertaking, or result in the imposition of any lien,
charge or encumbrance of any nature on any of the properties of Borrower.
c. Valid, Binding and Enforceable. This Amendment and any other instrument,
document or agreement executed and delivered in connection herewith, will be
valid, binding and enforceable in accordance with their respective terms subject
to bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and general equitable principles.
d. Costs. Upon execution hereof, Borrower shall pay all costs (including
attorneys' fees of Lenders) attendant to this Amendment.
3. Ratification of Loan Documents. This Amendment is hereby incorporated into
and made a part of the Loan Agreement and all other Loan Documents respectively,
the terms and provisions of which, except to the extent modified by this
Amendment are each ratified and confirmed and continue unchanged in full force
and effect. Borrower acknowledges and agrees that, to its knowledge, it has no
defenses, set-offs, counterclaims or deductions of any nature with respect to
its obligations to Lender. Any reference to the Loan Agreement and all other
Loan Documents respectively in this or any other instrument, document or
agreement related thereto or executed in connection therewith shall mean the
Loan Agreement and all other Loan Documents respectively as amended by this
Amendment. The Loan Agreement and this Amendment shall be construed as
integrated and complementary of each other, and augmenting and not restricting
Lender's powers, rights, remedies and security. If, after applying the
foregoing, an inconsistency still exists, the provisions of this Amendment shall
control.
4. Effectiveness Conditions. This Amendment shall become effective upon the full
execution of this Amendment and the following:
a. The execution and delivery by the Borrower of a Fourth Amended and Restated
Revolving Credit Note for each of the Lenders for the total principal amount of
such Lender's Revolving Credit Facility Pro Rata Share, in the form set forth on
Exhibit 2.1 of the Loan Agreement;
b. A Certificate of the Secretary or Assistant Secretary of the Borrower, dated
the date hereof, including (i) resolutions duly adopted by the Borrower
authorizing this Amendment, and (ii) evidence of the incumbency and signature of
the officers executing the Amendment on the Borrower's behalf;
c. Evidence, acceptable to the Lenders, of the (i) dissolution of Pinnacle
Consulting, Inc., and (ii) Software Analysis & Management, Inc.;
d. Payment by Borrower of the Lender's legal fees attendant to this Amendment;
and
e. Any other documents reasonably required by Agent or Lenders.
5. Governing Law. This Amendment and all instruments, documents and agreements
and the rights and obligations of the parties hereto and thereto shall be
governed by and interpreted in accordance with the substantive laws of the
Commonwealth of Pennsylvania.
6. Severability. The invalidity or unenforceability of any provision of this
Amendment shall not affect the validity or enforceability of the remaining
provisions.
7. Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
8. Modification. This Amendment may not be modified, amended or terminated
except by an agreement in writing executed by the parties hereto.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.
BORROWER: RCM TECHNOLOGIES, INC.
By:__________________________
Name:________________________
Title:_______________________
CATARACT, INC.
By:__________________________
Name:________________________
Title:______________________
RCM TECHNOLOGIES (USA), INC.
By:__________________________
Name:________________________
Title:_______________________
PROGRAMMING ALTERNATIVES
OF MINNESOTA, INC.
By:__________________________
Name:________________________
Title:_______________________
RCMT DELAWARE, INC.
By:__________________________
Name:________________________
Title:_______________________
RCM TECHNOLOGIES CANADA CORP.
By:__________________________
Name:________________________
Title:_______________________
BUSINESS SUPPORT GROUP OF MICHIGAN, INC.
By:__________________________
Name:________________________
Title:_______________________
AGENT: CITIZENS BANK OF PENNSYLVANIA,
as Administrative Agent and Arranger
By:_________________________
Name:_______________________
Title:______________________
LENDERS:
CITIZENS BANK OF PENNSYLVANIA,
as Lender
By:_________________________
Name:_______________________
Title:______________________
SUNTRUST BANK, ATLANTA,
as Documentation Agent and Lender
By:_________________________
Name:_______________________
Title:______________________