EXHIBIT 10 (a)
Fifth Amendent and Modification To Amnended And Restated Loan and Security
Agreement and Amendent to Collateral Pledge 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 August 07, 2006
FIFTH AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT AND AMENDMENT TO COLLATERAL PLEDGE AGREEMENT
This FIFTH AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT AND AMENDMENT TO COLLATERAL PLEDGE AGREEMENT ("Amendment") is
dated as of August 07, 2006, by RCM TECHNOLOGIES, INC. ("RCM"), and ALL OF ITS
SUBSIDIARIES A PARTY HERETO (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 (other than Soltre
Technology, Inc., a Delaware corporation (the "New 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, a certain
Third Amendment and Modification to Amended and Restated Loan and Security
Agreement dated as of October 1, 2003, and a certain Fourth Amendment and
Modification to Amended and Restated Loan and Security Agreement dated as of
July 27, 2004 (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"). (The subsidiaries of RCM a party to this Amendment,
other than the New Borrower, are at times referred to herein as the "Existing
Borrowers").
B. In connection with the Loan Agreement, RCM, RCMT Delaware, Inc. and Agent
entered into a certain Collateral Pledge Agreement dated May 31, 2002 pursuant
to which RCM and RCMT Delaware, Inc., granted to the Lenders a first priority
security interest in the Collateral (as defined therein) (the "Pledge
Agreement").
C. 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").
D. RCM owns all of the equity interests of the New Borrower and pursuant to the
terms of the Loan Agreement, the New Borrower is required to become a "Borrower"
under the Loan Agreement and the other Loan Documents, and RCM is required to
pledge to the Lenders its equity interest in Soltre as additional Collateral. In
recognition of the benefits and privileges under the Loan Documents, the New
Borrower has also requested that it be permitted to join in the Loan Documents
as if an original signatory thereto. In light of the terms of the Loan Agreement
and the fact that the New Borrower desires to become a party to the Loan
Documents, the Existing Borrowers, the New Borrower, the Agent and the Lenders
have agreed to add the New Borrower as a "Borrower" under the Loan Agreement,
subject to the terms and conditions herein.
E. Borrower has requested that Lenders extend the term of the Revolving Credit
Notes and modify certain terms and covenants contained in the Loan Agreement and
Pledge Agreement, and Lender has agreed to extend the term of the Revolving
Credit Notes and modify those certain terms and covenants, subject to the terms
and conditions of this Amendment.
F. 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. Paragraph B of the "Background" Section of the Loan Agreement shall be
deleted in its entirety and replaced as follows:
B. The Borrower has requested that the Lenders agree
to amend and restate the Original Loan Agreement in its
entirety to, among other things (1) amend the Original
Revolving Credit Facility to provide for a revolving credit
facility having a maximum limit of $25,000,000.00 (including a
sublimit of $5,000,000.00 under such revolving credit facility
for the issuance of trade and standby letters of credit), and
(2) delete all references to the Retiring Lenders.
b. Certain definitions contained in Section 1.1 of the Loan Agreement shall be
amended, deleted and/or added as follows:
(i) Borrowing Base shall be deleted in its entirety.
(ii) Eligible Accounts shall be deleted in its entirety.
(iii) Revolving Credit Limit shall be deleted in its entirety and replaced as
follows:
Revolving Credit Limit - $25,000,000.00.
(iv) The first paragraph of the definition of "Applicable LIBOR Rate Margin"
shall be deleted in its entirety and replaced as follows:
Applicable LIBOR Rate Margin - The amount to
be added to the applicable LIBOR Rate to
determine the applicable LIBOR Based Rate
for all amounts outstanding under the Loans
which bear interest to the LIBOR Based Rate,
which amount shall be determined in
accordance with the ratio of the Borrower's
Total Funded Debt to EBIDTA as set forth in
the following matrix:
Total Funded Applicable LIBOR Rate Margin
------------- ----------------------------
Debt to EBITDA
--------------
>2.25x 225 b.p.
-
>1.75x and <2.25x 175 b.p.
-
> 1.25x and <1.75x 150 b.p.
-
<1.25x 125 b.p.
(v) The first paragraph of the definition of "Letter of Credit Applicable
Margin" shall be deleted in its entirety and replaced as follows:
Letter of Credit Applicable Margin - The
amount determined in accordance with the
ratio of the Borrower's Total Funded Debt to
EBITDA as set forth in the following matrix:
Total Funded Letter of Credit Applicable Margin
------------ ----------------------------------
Debt to EBITDA
--------------
>2.25x 2.25% per annum
-
>1.75x and <2.25x 1.75% per annum
-
> 1.25x and <1.75x 1.50% per annum
-
<1.25x 1.25% per annum
(vi) 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 not be
less than $33,498,000.00 as of December 31,
2005, plus fifty percent (50%) of quarterly
Net Income thereafter (with no credit for
losses).
(vii) Majority Lenders shall be deleted in its entirety and replaced as follows:
Majority Lenders -
(i) So long as Citizens holds 60% and
SunTrust holds 40%, respectively, of
the aggregate amount of the
Revolving Credit Facility Pro Rata
Shares:
At any time while no Loans are
outstanding hereunder, the Lenders
holding one hundred percent (100%)
of the aggregate amount of the
Revolving Credit Facility Pro Rata
Shares at such time, and at any time
while Loans are outstanding
hereunder, the Lenders holding one
hundred percent (100%) of the
outstanding aggregate principal
amount of the Loans hereunder.
(ii) Otherwise:
At any time while no Loans are
outstanding hereunder, the Lenders
holding at least sixty percent (60%)
of the aggregate amount of the
Revolving Credit Facility Pro Rata
Shares at such time, and at any time
while Loans are outstanding
hereunder, the Lenders holding at
least sixty percent (60%) of the
outstanding aggregate principal
amount of the Loans hereunder.
(viii) Revolving Credit Maturity Date shall be deleted in its entirety and
replaced as follows:
Revolving Credit Maturity Date -- August 31, 2011.
c. The reference to "2,000,000.00" in section 2.1(e) of the Loan Agreement is
hereby changed to "5,000,000.00".
d. The first sentence of Section 2.5(b) of the Loan Agreement shall be deleted
in its entirety and replaced 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 25.0 bp
-
>1.75x and <2.25x 20.0 bp
-
> 1.25x and <1.75x 15.0 bp
-
<1.25x 12.5 bp
e. Sections 6.9(b) and 6.9(c) shall be deleted in their entirety
and replaced as follows:
(b) The Borrower shall not permit, in the
aggregate, Capital Expenditures and/or
purchase money financing (excluding
Acquisitions) to exceed, in the aggregate,
5,000,000.00 in any rolling four quarter
period.
(c) The Total Funded Debt to EBITDA ratio
shall at no time exceed a maximum of 2.50 x.
f. The reference to sixty (60) days in Section 6.10(a)(iv) of the Loan Agreement
is hereby changed to "ninety (90) days".
g. Section 6.10(a)(viii) of the Loan Agreement is hereby deleted in its
entirety.
h. The last sentence of Section 6.12 of the Loan Agreement is hereby deleted in
its entirety and replaced as follows:
"Notwithstanding anything to the contrary
contained in this Agreement, prior to the
occurrence of an Event of Default, the
Borrower shall not be required to reimburse
the Agent for any such expense or audit;
however, on or after an Event of Default,
the cost of such audits and all such
expenses shall be borne solely by the
Borrower".
i. The reference to $1,000,000.00 U.S. Dollars in Section 6.19 of the Loan
Agreement is hereby changed to "$1,500,000.00 U.S. Dollars".
j. 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), other than Acquisitions of the
assets or stock of one Borrower (other than
RCM), by another Borrower, must be approved
by the Majority Lenders if Total Funded Debt
to EBITDA of the Borrower (for the prior
rolling two (2) quarters times two (2))
following such Acquisition exceeds 1.5x on a
pro forma basis. Any Acquisition (regardless
of whether such Acquisition is funded with
the proceeds of any Loan hereunder) of an
entity exhibiting negative EBITDA in the
preceding 12 months must be approved by the
Majority Lenders, unless such negative
EBITDA is solely a result of excess
distributions and/or excess compensation
paid by such entity to its members,
shareholders or equity owners (as determined
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 an adjusted
historical financial basis, unless such
non-compliance is solely a result of excess
distributions and/or excess compensation
paid by such acquired entity to its members,
shareholders or other equity owners (as
determined by the Majority Lenders in their
sole discretion). 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.
k. Section 6.18(a) of the Loan Agreement shall be deleted in its entirety
and replaced as follows:
(a) In the event that ▇▇▇▇ ▇▇▇▇▇ leaves his
position as CEO and/or Chairman of the Board
of Directors of RCM, Inc., the Borrower will
obtain, within 180 days thereof, the written
consent of the Majority Lenders with respect
to any proposed replacement, which consent
shall not be unreasonably withheld.
l. Section 7.6 of the Loan Agreement is hereby amended by adding the following
sentence to the end of such Section.
"Solely for purposes of this Section 7.6,
any deferred portion of a purchase price
which may be required to be paid by the
Borrower in connection with a Permitted
Acquisition, based on the performance of the
acquired business following the Permitted
Acquisition, shall not be considered
"borrowed money".
m. Exhibits 5.3 and 5.10 of the Loan Agreement shall be deleted in their
entirety and replaced with Schedule 1 hereto.
2. Joinder.
a. Upon the effectiveness of this Amendment, the New Borrower joins in, assumes
the obligations of a Borrower under, adopts the terms of and becomes a Borrower
under, the Loan Agreement. All references to Borrower contained in the Loan
Documents are hereafter deemed, for all purposes, to refer to and include the
New Borrower, and the New Borrower hereby agrees to comply, from and after the
date hereof, with all of the terms and conditions of the Loan Documents as if
they were original signatories thereto.
b. Without limiting the generality of the provisions of subparagraph (a) above;
(i) The New Borrower is liable, on a joint and several basis, along with all of
the other Existing Borrowers for all Obligations incurred at any time by any one
or more Existing Borrowers under the Loan Documents, as amended hereby or as the
same may be hereafter amended, modified or supplemented; and
(ii) As a security for the payment of the Obligations, and satisfaction by the
Borrower of all covenants and undertakings contained in the Loan Agreement and
the other Loan Documents:
(A) The New Borrower hereby assigns and grants to the Agent, on behalf of the
Lenders, a first lien on and security interest in, upon and to all of its
Property and business assets, including without limitation to the following
described Property (the "Collateral"):
(1) Accounts, Contracts, Rights, Etc. - All now owned and hereafter acquired,
created, or arising Accounts, accounts receivable, notes receivable, contract
rights, chattel paper, documents (including documents of title), instruments and
letters of credit;
(2) Inventory - All now owned or hereafter acquired, created or arising
Inventory of every nature and kind, wherever located;
(3) Equipment - Except as set forth in Section 7.3(d) of the Loan Agreement, all
now owned or hereafter acquired equipment, including without limitation
machinery, furniture and fixtures, wherever located, and all replacements,
parts, accessories, substitutions and additions thereto;
(4) General Intangibles - All now owned and hereafter acquired, created or
arising general intangibles of every kind and description, including, but not
limited, to all existing and future customer lists, telephone lists and
directories, choses in action, loans, claims, books, records, patents and patent
applications, copyrights, trademarks, tradenames, tradestyles, trademark
applications, blueprints, drawings, designs and plans, trade secrets, formulae,
tax and other types of refunds, rights to or in employee or other pension,
retirement or similar plans and any assets thereof, or any portion thereof,
including without limitation refunds for overpayments, distributions upon
termination, reversion of any surplus assets or otherwise, returned and unearned
insurance premiums, rights and claims under insurance policies relating to the
Collateral, computer information, software, records, data and except where the
terms of same prohibit the grant of a security interest, contracts, contract
rights, distributorship agreements, licenses and license agreements.
(5) Deposit Accounts and Related Property - All now existing and hereafter
acquired or arising deposit accounts, investment accounts, commercial paper
investment property, including investment securities, and certificates of
deposit, of every nature wherever located, and all documents and records
associated therewith;
(6) Property in Lender's Possession - All property, now or hereafter in the
Agent's or any Lender's possession;
(7) Other Property - All other personal Property of such equity not described
above whether now existing or hereafter acquired;
(8) Intercompany Notes - All Intercompany Notes; and
(9) Proceeds - The proceeds (including, without limitation, insurance proceeds),
whether cash or non-cash, of all the foregoing.
c. The New Borrower hereby covenants, confirms and agrees that, as security for
the repayment of the Obligations, the Agent, for the benefit of the Lenders is
hereby granted, and shall therefore have and continue to have, a continuing
first priority lien on and security interest in all of the Collateral, all
whether now existing or hereafter acquired, created or arising, and all proceeds
thereof.
3. Pledge Agreement. The Schedule of Collateral attached to the Pledge Agreement
shall be deleted in its entirety and replaced with Schedule 2 hereto.
4. Representations and Warranties. Borrower (on a joint and several basis)
warrants and represents to Lenders that:
a. Prior Representations. By execution of this Amendment, each Existing Borrower
reconfirms, and the New Borrower hereby represents and warrants that except as
otherwise indicated on Schedule 1 hereto, all warranties and representations
made to Lenders under the Loan Agreement, as amended hereby, 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 14 to Borrower's financial
statements included in Borrower's Form 10-Q for the period ending July 1, 2006.
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. Canadian Collateral. The Borrower's furniture, fixtures, inventory,
equipment, intellectual property and leasehold improvements located in Canada do
no have an aggregate net book value in excess of $1,500,000.00, U.S. Dollars.
c. 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.
d. 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.
e. Costs. Upon execution hereof, Borrower shall pay all costs (including
attorneys' fees of Lenders) attendant to this Amendment.
5. Increase in Revolving Credit Limit. The Borrower shall have the option (on a
one time basis only) to increase the Revolving Credit Limit to an aggregate
amount not to exceed $40,000,000.00, provided that (i) the Borrower provides to
Agent forty-five (45) days prior written notice of its exercise of such option,
(ii) no Event of Default or Unmatured Event of Default has occurred and/or is
continuing as of the date of such increase, (iii) the Borrower shall have
received commitments from one or more existing Lenders and, if necessary, one or
more new Lenders for such increase (with any new Lender to be reasonably
acceptable to the Agent and the Borrower), (iv) the Agent shall have received a
satisfactory legal opinion of counsel to the Borrower, and such agreements,
amendments, and other documentation executed by the Borrower and its Affiliates
as the Agent determines is necessary in its sole discretion to effectuate such
increase, and (v) the Borrower shall pay a fee to the Agent (for the benefit of
the Lenders in accordance with their pro rata percentages), equal to 10 b.p. of
the amount of any such increase in the Revolving Credit Limit.
6. 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.
7. Effectiveness Conditions. This Amendment shall become effective upon the full
execution of this Amendment and the following:
a. Execution and delivery by each Borrower (including without limitation, the
New Borrower), of a Fifth Amended and Restated Revolving Credit Note in favor of
each Lender, for the total principal amount of such Lender's Revolving Credit
Facility Pro Rata Share, which such note shall be in the form of Exhibit 2.1 of
the Loan Agreement.
b. A Certificate of the Secretary or Assistant Secretary of RCM and the New
Borrower, dated the date hereof, including resolutions duly adopted by the
Borrower authorizing this Amendment;
c. Payment by Borrower of the Lender's legal fees attendant to this Amendment;
and
d. Delivery by Borrower of financing statement, tax, and judgment lien search
results against the New Borrower;
e. Delivery by Borrower of copies of certificates of good standing for the New
Borrower (dated not earlier than 30 days prior to the date hereof) from the
office of the secretary of state of its incorporation or organization and of
each state in which it is qualified to do business as a foreign corporation or
organization.
f. Any other documents reasonably required by Agent or Lenders.
8. Post-Closing Condition. The Borrower agrees and covenants:
a. to provide within ten (10) days of the date hereof:
(i) Certificate of the Secretary or Assistant Secretary of the Borrower (other
than RCM and the New Borrower), including resolutions duly adopted by the
Borrower authorizing this Amendment;
(ii) Original Stock Certificate No. 9 of Soltre for 3,000,000 shares of common
stock and an executed Irrevocable Stock Power for such shares of stock, which
such Irrevocable Stock Power shall be in the form required under the Pledge
Agreement.
(iii) Evidence reasonably satisfactory to Agent and Lenders that all of the
preferred stock of Soltre heretofore issued has been redeemed by Soltre.
b. To promptly take such action as the Agent shall request in order to create
and/or maintain a continuing first priority lien on the Borrower's Accounts
where the related Account Debtor is domiciled in Canada.
9. 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.
10. Severability. The invalidity or unenforceability of any provision of this
Amendment shall not affect the validity or enforceability of the remaining
provisions.
11. 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.
12. 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:________________________
SOLTRE TECHNOLOGY 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:________________________
SCHEDULE 1
Revised Exhibits 5.3 and 5.10
SCHEDULE 2
SCHEDULE OF COLLATERAL
The following Collateral is hereby pledged by Pledgor and Pledgee
pursuant to the Collateral Pledge Agreement to which this Schedule is attached:
Company Certificate No. Amount of Shares
RCMT Delaware, Inc. 1 1,000
Business Support Group of Michigan, Inc. 9 50,000
10 3
Pinnacle Consulting, Inc. 12 500,000
RCM Technologies Canada Corp. C-1 2,000
Soltre Technology, Inc. 9 3,000,000
2277682v6