SECOND 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 February 26, 2003
9
SECOND AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT AND MODIFICATION TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT ("Amendment") is dated as of February 26, 2003, 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, as amended by
a certain Amendment and Modification to Amended and Restated Loan and Security
Agreement dated as of December 30, 2002 (collectively, the " Loan Agreement"),
Lender has 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. 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 $10,000,000.00 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. The definition of "Net Income" contained in Section 1.1 of the Loan Agreement
shall be deleted in its entirety and replaced as follows:
Net Income. Consolidated net income of RCM
after taxes as such would appear on a
statement of income prepared in accordance
with GAAP; (i) provided however, that such
Consolidated net income of RCM after taxes
shall be determined without regard to (i)
any expense, loss, charge or other reduction
in income attributable and arising solely
from the verdict ("Verdict"), including
direct litigation costs, the costs of any
appeal bonds and the amount of interest
accrued on the Verdict, up to an amount not
to exceed $10,718,000 in the aggregate (the
"Verdict Liability"), in the matter entitled
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. RCM Technologies, Inc.
(Docket No. BER-L-10166-98) in the Superior
Court of the State of New Jersey (the
"▇▇▇▇▇▇ Suit"), as more particularly
described in Item 4 of the Borrower's Form
8-K dated January 24, 2003, and the press
release attached thereto as an exhibit, and
(ii) any tax savings ("Verdict Tax Savings")
resulting from RCM's deducting on its
federal, state, local and foreign tax
returns any amounts (including direct
litigation costs) attributable and arising
as a result of the Verdict; and provided
further if the Verdict is hereafter
modified, amended, altered, revised,
compromised, settled or otherwise changed,
the after-tax effect ("Post-Modification Tax
Affect"), of such action shall be excluded
from such consolidated net income of RCM
after taxes.
c. The definition of "Minimum Tangible Net Worth" contained in Section 1.1 of
the Loan Agreement 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, plus (iv) the Verdict Tax Savings
(if any), plus (v) the Post-Modification Tax
Affect (if any), less (vi) the Verdict
Liability, less (vii) the sum of (A) the
Existing Additional Deferred Consideration
Payments paid on or after July 1, 2001, (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 (vii) shall not in the
aggregate exceed the increase in the Minimum
Tangible Net Worth arising from the Net
Income Component.
d. The definition of "Revolving Credit Limit contained in Section 1.1 of the
Loan Agreement shall be deleted in its entirety and replaced as follows:
Revolving Credit Limit - The lesser of (k)
$25,000,000.00, or (ii) the Borrowing Base
as then in effect.
e. Section 2.1(e) of the Loan Agreement shall be deleted in its entirety
and replaced as follows:
(e) Under the Revolving Credit Facility, the
Borrower may request the issuance of a
letter of credit (each a "Letter of Credit")
by delivering to the Agent a completed
application and agreement for letter of
credit in such form as the Agent may specify
from time to time by no later than 10:00
a.m., Philadelphia time, at least three (3)
Business Days, or such shorter period as may
be agreed to by the Agent, in advance of the
proposed date of issuance. Each Letter of
Credit shall be a trade letter of credit or
a Standby Letter of Credit. Subject to the
terms and conditions hereof, in reliance on
the agreements of the other Lenders as set
forth in this Section 2.1, and provided the
Agent has not received written notice from a
Lender that an Event of Default or Unmatured
Event of Default has occurred, the Agent
will issue a Letter of Credit provided each
Letter of Credit shall (i) have a maximum
maturity of twelve (12) months from the date
of issuance, and (ii) in no event expire
later than one Business Day prior to the
Revolving Credit Maturity Date and provided
that in no event shall (i) the Letter of
Credit Outstandings exceed, at any one time,
$10,000,000.00 or (ii) the sum of the
aggregate Letter of Credit Outstandings and
the Revolving Credit Loans then outstanding
exceed, at any one time, the aggregate
Revolving Credit Facility Pro Rata Shares of
the Lenders then in effect.
f. The reference to "40,000,000.00" in Section 2.5(b) of the Loan Agreement is
hereby changed to "25,000,000.00"
g. Schedule A of the Loan Agreement shall be deleted in its entirety and
replaced with the form of Schedule A attached to this Amendment.
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 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 the Borrower expresses no opinion herein with respect to the
▇▇▇▇▇▇ 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. Verdict. The Banks hereby agree to waive their right to declare an Event of
Default under Sections 8.1(h) and 8.1(q) of the Loan Agreement as a result of
the Verdict. However, the waiver by the Banks under this Paragraph 4 is specific
with respect to the Verdict and should not be construed to be, or operate as, a
waiver of any other right of the Banks' under the Loan Agreement, nor shall it
preclude any other or future exercise of the rights granted to the Banks under
the Loan Agreement upon a failure to comply with any term, covenant or condition
contained in the Loan Agreement including, without limitation, any other event
which would constitute an Event of Default under Sections 8.1(h) and/or 8.1(q)
of the Loan Agreement.
5. 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 Second Amended and Restated
Revolving Credit Note for each of the Lenders for the total principal amount of
such Lender's Revolving Credit Pro Rata Share, in the form set forth on Exhibit
2.1 of the Loan Agreement.
b. Payment of the Lender's legal fees attendant to this Amendment;
c. Payment to Agent, on behalf of the Banks, the fees reflected on Schedule B
hereto;
d. 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.
e. 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:____________________________________
SCHEDULE A
REVOLVING CREDIT FACILITY
Lenders Revolving Credit Revolving Credit
-------
Pro Rata Share Pro Rata Percentage
Citizens Bank of Pennsylvania $10,526,325 42.1%
Fleet National Bank $ 9,210,525 36.8%
Sun Trust Bank $ 5,263,150 21.1%
TOTAL COMMITMENT $25,000,000 100%
=========== ====
SCHEDULE B
FEES
Citizens Bank of Pennsylvania $13,157.90
Sun Trust Bank, Atlanta $ 6,578.94
Fleet National Bank $11,513.16
