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 December 30, 2002
AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT ("Amendment") is dated as of December 30, 2002, 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.) ("Citizens"), and SUNTRUST BANK (formerly known as
SUNTRUST BANK ATLANTA), in its capacity as documentation agent and lender
("Suntrust") and FLEET NATIONAL BANK in its capacity as syndication agent and
lender ("Fleet") (Citizens, Suntrust and Fleet 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 and Lenders ("Loan
Agreement"), Lender made available to Borrower a revolving line of credit in the
aggregate amount of $40,000,000.00 (the "Revolving Credit"), and a term loan in
the amount of $7,500,000.00 ("Term Loan").
B. The Revolving Credit is evidenced by certain Revolving Credit Notes dated May
31, 2002, from Borrower to Lender in the aggregate amount of $40,000,000.00
("Revolving Credit Notes").
C. The Term Loan was evidenced by certain Term Notes dated May 31, 2002 from the
Borrower to the Lenders in the aggregate amount of $7,500,000.00, ("Term
Notes").
D. Borrower has requested that Lender modify certain covenants contained in the
Loan Agreement, and Lender has agreed to modify those certain covenants subject
to the terms and conditions of this Amendment.
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) Adjusted Net Income shall be deleted in its entirety and replaced as
follows:
Adjusted Net Income -The sum of (i) Net
Income, (ii) the net loss (expressed as a
positive number), if any, arising solely
from Permitted Asset or Stock Sales up to an
amount, which when added to other net losses
previously recognized under this
subparagraph (ii), does not exceed
$5,000,000.00 in the aggregate, (iii) the
Subsequent Additional Net Restructuring
Charge, and (iv) other extraordinary
non-cash, non-recurring charges approved by
the Majority Lenders, which approval will
not be unreasonably withheld. (In no event
shall any charge related to goodwill taken
by the Borrower after December 31, 2002 be
considered as an adjustment to Adjusted Net
Income).
(2) 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) Additional Net
Restructuring Charge, (iii) the Subsequent
Additional Net Restructuring Charge, (iv)
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 (iv),
does not exceed $5,000,000.00 in the
aggregate, and (v) other non-cash charges
approved by the Majority Lenders, which
approval will not be unreasonably withheld.
(In no event shall any charge related to
goodwill taken by the Borrower after
December 31, 2002 be considered as an
adjustment to EBITDA).
(3) Income Tax Benefit shall be deleted in its entirety and replaced as follows:
Income Tax Benefit - The net amount by which
the Borrower's Federal and State income tax
obligations are reduced as a result of the
Borrower deducting all or a portion of (i)
the Additional Net Restructuring Charge on
its Federal and State income tax returns for
its taxable year ended December 31, 2001
and/or (ii) the Subsequent Additional Net
Restructuring Charge on its Federal and
State Income tax returns for its taxable
year ended December 31, 2002, and by giving
effect to the net tax effect of any
adjustments increasing or decreasing such
deduction(s) subsequent to its taxable year
ended December 31, 2001.
(4) Minimum Tangible Net Worth shall be deleted in its entirety and replaced as
follows:
Minimum Tangible Net Worth - RCM's
consolidated Tangible Net Worth shall be (i)
at least $4,000,000.00 as of June 30, 2001,
plus (ii) seventy-five percent (75%) of
quarterly Net Income thereafter (determined
without taking the Additional Net
Restructuring Charge or Subsequent
Additional Net Restructuring Charge into
account and with no credit for losses) (the
"Net Income Component"), plus (iii) one
hundred percent (100%) of the Income Tax
Benefit, less (iv) the sum of (A) the
Existing Additional Deferred Consideration
Payments paid on or after July 1, 2001, plus
(B) the New Acquisition Consideration
Payments (hereinafter defined) (if any) paid
on or after July 1, 2001, plus (C) any net
losses (expressed as a positive number), if
any, arising solely from Permitted Asset or
Stock Sales up to an amount, which when
added to other net losses recognized under
this subparagraph (C), does not exceed
$5,000,000.00 in the aggregate, provided
that the reductions pursuant to clauses (A)
and (B) of clause (iv) shall not in the
aggregate exceed the increase in Minimum
Tangible Net Worth arising from the Net
Income Component.
(5) Permitted Acquisitions - shall be deleted in its entirety and
replaced as follows:
----------------------
Permitted Acquisitions - An Acquisition
which satisfies each of the criteria set
forth in Section 2.7 hereof, and for which
the Borrower has obtained the written
consent of the Majority Lenders.
(6) Subsequent Additional Net Restructuring Charge shall be added to
Section 1.1 as follows:
----------------------------------------------
Subsequent Additional Net Restructuring
Charge. A one-time deduction of good-will
taken by RCM during the fourth quarter of
its Fiscal Year ended December 31, 2002, up
to an amount not to exceed $30,000,000.00.
b. Section 2.6 of the Loan Agreement shall be amended by adding the
following as Section 2.6(e):
(e) Additional Mandatory Prepayment. In
addition to any other payments of principal
of the Revolving Credit Loans required to be
made by Borrower hereunder, the Borrower
shall also be required to make an additional
payment of principal of the Revolving Credit
Loans by an amount equal to the cash
proceeds actually received by Borrower
relating to the Income Tax Benefit
associated with its recognition of the
Additional Net Restructuring Charge. The
payment(s) required to be made by Borrower
under this Section 2.6(e) shall be applied
first to accrued but unpaid interest on the
Revolving Credit Loans and then to the
principal payments due under the Revolving
Credit Loans. Such payment(s) shall be due
and payable within five (5) days of RCM's
receipt of tax refund(s) arising as a result
of its submission of a claim for such
refund(s) due to its recognition of the
Additional Net Restructuring Charge. Prior
to the occurrence of an Event of Default or
Unmatured Event of Default, Agent shall be
permitted, at its sole option, to the extent
any principal payment hereunder is to be
applied to the outstanding balance of a
LIBOR Based Rate Loan, to permit the
Borrower to defer such payment until the end
of the applicable LIBOR Interest Period. If
the payment pursuant to this Section 2.6(c)
is delayed pursuant to the immediately
preceding sentence, interest shall continue
to accrue on the outstanding principal of
the Revolving Credit Loans until such
payment is actually made by Borrower to
reduce the outstanding principal balance of
the Revolving Credit Loans.
c. Section 2.7 of the Loan Agreement shall be deleted in its entirety
and replaced 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 Permitted
Acquisitions (subject to the conditions set
forth below), (ii) to refinance all existing
indebtedness owed by the Borrower pursuant
to the Original Loan Agreement, and (iii)
for working capital and other general
corporate purposes.
d. Section 6.14 of the Loan Agreement shall be deleted in its entirety
and replaced as follows:
6.14 Acquisitions. All Acquisitions
(regardless of whether such Acquisition is
funded with the proceeds of any Loan
hereunder), must be approved by the Majority
Lenders, in their sole discretion. All
Acquisitions shall be in the Borrower's same
line or similar line of business and show
historical and pro forma covenant compliance
based on unadjusted historical financial
basis. The results of due diligence,
including without limitation a review of the
acquisition documents, shall be to the
satisfaction of the Majority Lenders in
their sole discretion. Notwithstanding
anything herein to the contrary, any
Acquisition shall have been approved by the
Board of Directors or like governing body of
the acquiree.
2. Permitted Asset or Stock Sale. The Lenders' hereby acknowledge and confirm
that pursuant to the terms of that certain Asset Purchase Agreement dated August
31,2002 between RCM and Premier Staffing Services of ▇▇▇▇▇▇▇▇▇▇, LLC, RCM sold
assets related to its Intertec division located in Montclair, New Jersey, and
that such sale constituted a "Permitted Asset or Stock Sale" under the terms of
the Loan Agreement..
3. 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 Lender under the Loan Agreement
and the other Loan Documents are true and correct in all material respects as of
the date hereof, 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 8
to Borrower's financial statements included in Borrower's Form 10-Q for the
period ending September 30, 2002. In the opinion of management and based upon
the advice of counsel, the Borrower has meritorious defenses to the lawsuits and
claims. 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.
4. 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.
5. Effectiveness Conditions. This Amendment shall become effective upon the full
execution of this Amendment and the following:
a. Payment of the Lender's legal fees attendant to this Amendment;
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. Any other documents reasonably required by Agent or Lenders.
6. 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.
7. Severability. The invalidity or unenforceability of any provision of this
Amendment shall not affect the validity or enforceability of the remaining
provisions.
8. 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.
9. 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:_______________________
SOFTWARE ANALYSIS &
MANAGEMENT, 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:______________________
PINNACLE CONSULTING, 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:______________________
FLEET NATIONAL BANK,
as Syndication Agent and
Lender
By:_________________________
Name:_______________________
Title:______________________