FOURTH AMENDMENT

 

TO

 

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

 

Fourth Amendment (the “Amendment”) to a certain Second Amended and Restated Loan and Security Agreement, dated as of February 19, 2009, by and among RCM Technologies, Inc. and all of its subsidiaries (collectively, the “Borrower”), Citizens Bank of Pennsylvania, a Pennsylvania state chartered bank, in its capacity as administrative agent and arranger (the “Agent”), and Citizens Bank of Pennsylvania, as lender (the “Bank”).

WHEREAS, the Bank and the Borrower made, executed and delivered a Second Amended and Restated Loan and Security Agreement, dated as of February 19, 2009, as amended by a certain Amendment to Second Amended and Restated Loan and Security Agreement dated as of July 22, 2011, a certain Second Amendment to Second Amended and Restated Loan and Security Agreement dated as of October 24, 2011, and a certain Third Amendment to Second Amendment and Restated Loan and Security Agreement dated as of December, 2011 (collectively, the “Original Loan and Security Agreement”), and in connection therewith, the Borrower executed and delivered a Sixth Amended and Restated Revolving Credit Note payable to the order of the Bank, in the original principal amount of $15,000,000.00, dated February 19, 2009 (the “Original Revolving Promissory Note”); and

WHEREAS, as security for (a) the punctual performance in full by the Borrower of its obligations under the Loan Documents (as such term is defined in the Original Loan and Security Agreement), (b) the punctual payment in full of all amounts owing or to be owing under any Loan Document, (c) the punctual payment of any other amounts which at any time may be due and payable from the Borrower to the Bank, in each case whether presently existing or hereafter arising (collectively, the “Secured Obligations”), the Borrower granted a security interest to the Bank in the Collateral (as such term is defined in the Original Loan and Security Agreement), pursuant to the terms and provisions of the Original Loan and Security Agreement; and

WHEREAS, the Borrower has requested the Bank amend certain terms and provisions of the Original Loan and Security Agreement, and the Bank is willing to consent to such modifications upon the terms and conditions set forth herein, and in a certain Seventh Amended and Restated Revolving Credit Note to be executed and delivered by the Borrower to the Bank simultaneously herewith (the “Restated Credit Note”).

NOW, THEREFORE, in consideration of the mutual promises herein contained, and each intending to be legally bound hereby, the parties hereto hereby agree as follows:

1.   Except as expressly defined herein, all terms used herein shall have the meanings ascribed to them in the Original Loan and Security Agreement.  This Amendment is intended to amend the Original Loan and Security Agreement, and the Original Loan and Security Agreement shall be so amended, from and as of the date hereof.

2.   The Original Loan and Security Agreement shall be amended so that all references to “Agreement” contained therein shall mean the Original Loan and Security Agreement, as amended herein, and as further amended, supplemented or modified from time to time.

3.   The first sentence of the definition of “Applicable LIBOR Rate Margin” found in Section 1.1 of the Original Loan and Security Agreement is hereby amended and restated in its entirety 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 at the LIBOR Based Rate, which amount shall be determined in accordance with the ratio of the Borrower’s Total Funded Debt to EBITDA a set forth in the following matrix:

 

 

4.   The first sentence of the definition of “Applicable Prime Rate Margin” is hereby amended and restated in its entirety as follows:

 

Applicable Prime Rate Margin -The amount to be added to the applicable Prime Rate to determine the applicable Prime Based Rate for all amounts outstanding under the Loans which bear interest at the Prime Based Rate, which amount shall be determined in accordance with the ratio of the Borrower’s Total Funded Debt to EBITDA as set forth in the following matrix:

 

 

5.   The definition of “EBITDA” found in Section 1.1 of the Original Loan Agreement is hereby amended and restated in its entirety as follows:

 

EBITDA - The sum of (i) Net Income (including, to the extent not otherwise recognized, any realized gains or losses from foreign exchange transactions) 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.

 

6.   The definition of “Fixed Charge Ratio” found in Section 1.1 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

“Fixed Charge Ratio”

 

(A)  If there is no Total Funded Debt outstanding in the fiscal quarter in which a Distribution is paid or in the fiscal quarter immediately following such fiscal quarter:

 

The sum of EBITDA, plus 150% of paid Distributions, divided by the sum of (i) interest expense, plus (ii) income taxes paid, plus (iii) scheduled principal payments, plus (iv) Unfunded Capital Expenditures, plus (v) paid Distributions.

 

(B)  If there is Total Funded Debt outstanding in the fiscal quarter in which a Distribution is paid or in the fiscal quarter immediately following such quarter:

 

The sum of EBITDA, divided by the sum of (i) interest expense, plus (ii) income taxes paid, plus (iii) scheduled principal payments, plus (iv) Unfunded Capital Expenditures, (v) plus paid Distributions.  (In the event an amount attributable to a paid Distribution was added to the numerator of the Fixed Charge Ratio pursuant to subparagraph (A) above during the testing period in question, that amount shall continue to be included in the numerator for purposes of determining the Fixed Charge Ratio pursuant to this subparagraph (B)).

 

(In calculating the denominator of the Fixed Charge Ratio: (i) any deferred portion of a purchase price required to be paid by the Borrower in connection with a Permitted Acquisition shall not be considered; and (ii) solely for the relevant reporting periods, the Permitted Dividend, if made, shall not be considered in calculating the numerator and denominator of the Fixed Charge Ratio).

 

7.   The definition of “Revolving Credit Limit” found in Section 1.1 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

Revolving Credit Limit –$35,000,000.00

 

8.   The definition of “Revolving Credit Maturity Date” found in Section 1.1 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

“Revolving Credit Maturity Date”   -  December 11, 2019.

 

9.   The definition of “Revolving Credit Notes” found in Section 1.1 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

“Revolving Credit Notes” - Those notes described in Section 2.1(b), as they may be amended, supplemented, replaced or restated from time to time, including without limitation that certain Seventh Amended and Restated Revolving Credit Note in the original principal amount of $35,000,000.00.

 

10.   Section 1.1 of the Original Loan and Security Agreement is hereby amended by adding the following definition of “Cash Equivalents,” as follows:

 

“Cash Equivalents” (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency thereof, (b) commercial paper maturing no more than one hundred twenty (120) days from the date of creation thereof and having a rating reasonably acceptable to the Lenders, (c) certificates of deposit maturing no more than one hundred twenty (120) days from the date of creation thereof issued by commercial banks incorporated under the laws of the United States, each having combined capital, surplus and undivided profits of not less than $500,000,000 and having a rating of “A” or better by a nationally recognized rating agency; provided that the aggregate amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for any one such bank, or (d) time deposits maturing no more than thirty (30) days from the date of creation thereof with commercial banks or savings banks or savings and loan associations each having membership either in the FDIC or the deposits of which are insured by the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder.

 

11.   Section 1.1 of the Original Loan and Security Agreement is hereby amended by adding the following definition of “Modified Current Ratio,” as follows:

 

Modified Current Ratio - The sum of cash plus Cash Equivalents plus accounts receivables, divided by the sum of outstanding Revolving Credit Loans plus all Letter of Credit Outstandings.

 

12.   Section 1.1 of the Original Loan and Security Agreement  is hereby amended by adding the following definition of “Permitted Dividend,” as follows:

 

“ Permitted Dividend” - A one-time dividend of up to $2.00 per share declared in 2014, and payable to the shareholders of RCM in the aggregate amount of up to $26,500,000, which will be substantially paid on or before December 31, 2014 and which amount includes 2014 Unvested Dividend Equivalents (as defined below).  All Parties acknowledge that certain employees, directors and contractors hold dividend equivalent rights under unvested restricted share unit agreements which dividend equivalent rights shall be accrued before December 31, 2014 but paid after December 31, 2014 (the “ 2014 Unvested Dividend Equivalents ”).  In no event shall the 2014 Unvested Dividend Equivalents exceed $1,100,000.

 

13.   Section 2.5(b) of the Original Loan and Security 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:

 

 

The Unused Line Fee shall be charged on the average daily unused portion of the Revolving Credit Facility calculated by subtracting the sum of the average daily outstanding balance of all Revolving Credit Loans and Letter of Credit Outstanding from $35,000,000.  The Unused Line Fee shall be computed and paid on a quarterly basis, in arrears, on the first day of each April, July, October and January, and on the earlier of (i) the Revolving Credit Maturity Date or the date on which the Revolving Credit Facility is terminated by the Borrower pursuant to Section 2.1(d) hereof, and, in the event the Borrower requests a Line Reduction as provided in Section 2.1(d) hereof, on the effective date of such reduction.

 

14.   Section 2.7 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

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 finance the Permitted Dividend or such other dividends payable to the shareholders of RCM (for which the Borrower acknowledges the consent of the Lenders is required pursuant to Section 7.6 of this Agreement), (iii) the repurchase of RCM’s outstanding common stock (provided that the total amount of proceeds of the Loans used for such repurchases from and after December 12, 2014 does not exceed $5,000,000.00, in the aggregate), and (iv) for working capital and other general corporate purposes.

 

15.   Section 2.10 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

2.10 Accordion .  Upon the request of Borrower (which request may be made by Borrower only if no Event of Default or Unmatured Event of Default has occurred and/or is continuing), the Lenders agree to consider increasing the Revolving Credit Limit by $15,000,000.00, up to $50,000,000.00 in the aggregate, under the same terms and conditions as reflected herein, with any such increase requiring the unanimous written approval of the Agent and Lenders.  This accordion feature (the “Accordion Feature”) shall be in the sole discretion of the Lenders and Agent and shall not constitute an obligation or commitment to lend.  If the Accordion Feature is agreed to by the Lenders and Agent pursuant to the provisions of this Section 2.10, the Borrower shall be required to take such steps (including without limitation the execution of such documents) as the Agent determines necessary to effectuate the Accordion Feature.

 

16.   Section 6.9(c) is hereby amended and restated in its entirety as follows:

 

(c)

(i)  Prior to September 29, 2015, the Total Funded Debt to EBITDA ratio shall at no time exceed a maximum ratio of 3.00x; provided however if at any time prior to September 29, 2015, the Total Funded Debt to EBITDA is greater than 2.75x, but less than 3.00x, the Borrower shall also be required to maintain a Modified Current Ratio on the applicable testing date of not less than 1.20x.  (During the period the Modified Current Ratio is deemed to be in effect under this Section 6.9(c), the Borrower will be required to deliver an accounts receivable aging report in form acceptable to the Bank, to be delivered with the Borrower’s Compliance Certificate after the end of each (i) fiscal quarter of each fiscal year or (ii) fiscal year, of the Borrower (as applicable), during such period).

 

(ii)  On and after September 30, 2015, the Total Funded Debt to EBITDA ratio shall at no time exceed a maximum ratio of 2.75x.

 

(iii)  By way of clarification, and not in limitation of the foregoing, in all events on or after September 30, 2015, the Total Funded Debt to EBITDA ratio shall not exceed a maximum ratio of 2.75x.

 

17.   Section 6.9(d) of the Original Loan and Security Agreement is hereby deleted in its entirety.

 

18.   Section 6.18(a) of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

(a)   In the event that Rocco Campanelli leaves his position as CEO and/or Chairman of the Board of Directors of RCM, 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.

 

19.   Section 6.19 of the Original Loan and Security Agreement is hereby amended by adding the following sentence at the end of that Section:

 

In determining whether the Borrower owns furniture, fixtures, inventory, equipment, intellectual property and leasehold improvements located in Canada having an aggregate book value in excess of $1,500,000.00 U.S. Dollars, any such property (i) which is identified by the Borrower as a “pass-through purchase”, as shown on the most recent financial statements delivered by the Borrower to Agent, shall not be taken into account and (ii) the ownership of which the Borrower can establish, to the Lender’s satisfaction, must be promptly transferred to one of its customers.

 

20.   Section 7.6 of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

Distributions, Redemptions and Other Indebtedness : The Borrower shall not: (a) declare or pay or make any forms of Distribution to its shareholders, their successors or assigns other than (i) the Permitted Dividend, and (ii) Distributions constituting the repurchase of RCM’s outstanding stock, provided that from and after December 12, 2014, the total amount of such Distributions shall not exceed $5,000,000, in the aggregate; (b) make any prepayments on any existing or future indebtedness for borrowed money to any Person without the prior written consent of the Agent which consent will not be unreasonably withheld; or (c) hereafter borrow money other than from Lenders hereunder except (i) in connection with borrowed money giving rise to a Permitted Lien under Section 7.3(d) and, (ii) in connection with Permitted Acquisitions, subordinated Sellers Notes on terms and conditions reasonably acceptable to the Agent.  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.

 

21.   Section 8.1(p) of the Original Loan and Security Agreement is hereby amended and restated in its entirety as follows:

 

Chief Executive Officer - if Rocco Campanelli is no longer active in his capacity as CEO of RCM, unless a replacement is hired within 180 days that is reasonably satisfactory to the Majority Lenders; or

 

22.   Exhibit 6.11 of the Original Loan and Security Agreement is hereby deleted in its entirety and replaced with the form of Compliance Certificate attached as Exhibit A to this Amendment.

 

23.   Schedule A of the Original Loan and Security Agreement is hereby deleted in its entirety and replaced with Exhibit A attached to this Amendment.

 

24.   Pursuant to the terms of the Original Loan and Security Agreement, as amended herein, the Borrower has provided to the Bank, as security for the payment and performance of any and all of the Obligations and the performance of all other obligations and covenants of Borrower under the Original Loan and Security Agreement, as amended herein, the Restated Credit Note, and each other Loan Document, certain or contingent, now existing or hereafter arising, which are now, or may at any time or times hereafter be owing by Borrower to Bank, a first priority, perfected security interest in the Collateral.  The Borrower hereby ratifies and confirms the liens and security interests granted under the Original Loan and Security Agreement; and further ratifies and confirms, without condition, that (a) such liens and security interests shall secure the payment and performance of any and all of the Obligations and the performance of all other obligations and covenants of Borrower under the Original Loan and Security Agreement, as amended herein, the Restated Credit Note, and each other Loan Document, certain or contingent, now existing or hereafter arising, which are now, or may at any time or times hereafter be owing by Borrower to Bank, and (b) the perfected status and priority of such liens and security interests shall not be affected in any way by the amendments to the Original Loan and Security Agreement, as set forth herein.  The Borrower acknowledges that the outstanding principal amounts of the Original Revolving Promissory Note are due and owing without any claim, defense or set-off.

 

25.   All representations, warranties and covenants of the Borrower contained in the Original Loan and Security Agreement, are hereby ratified and confirmed without condition as if made anew upon the execution of this Amendment and are hereby incorporated by reference.  All representations, warranties and covenants of the Borrower, whether hereunder, or contained in the Original Loan and Security Agreement, shall remain in full force and effect until all amounts due under the Original Loan and Security Agreement, as amended herein, the Restated Credit Note and each other Loan Document, are satisfied in full.

 

26.   Except as modified by the terms hereof, all terms, provisions and conditions of the Original Loan and Security Agreement, and each other Loan Document, are in full force and effect, and are hereby incorporated by reference as if set forth herein.  This Amendment, Restated Credit Note and the Original Loan and Security Agreement shall be deemed as complementing and not restricting the Bank’s rights hereunder or thereunder.  If there is any conflict or discrepancy between the provisions of this Amendment and Restated Credit Note, and any provision of the Original Loan and Security Agreement, the terms and provisions of this Amendment and Restated Credit Note shall control and prevail.

 

27.   As a condition precedent to the effectiveness of this Amendment, simultaneously with the execution and delivery of this Amendment, the Borrower shall deliver to the Bank the following:

 

(a)   The Restated Credit Note, properly executed;

 

(b)   An incumbency certificate for the Borrower identifying all authorized officers, with specimen signatures;

 

(c)   A written opinion of the Borrower’s independent legal counsel addressed to the Agent for the benefit of all of the Lenders and opinions of such other counsel as the Agent deems necessary;

 

(d)   Certified copies of resolutions of the directors of the Borrower authorizing the execution, delivery and performance of this Amendment, the Restated Credit Note, and any other document hereunder, which resolutions shall be in form and substance satisfactory to the Bank in its sole discretion.

 

(e)   Uniform Commercial Code, judgment, federal and state tax lien searches against the Borrower, at the Borrower's expense, showing that the Collateral is not subject to any Liens except for Permitted Liens, together with Good Standing Certificates from each Borrower's state of creation.

 

(f)   Evidence of the merger of RCM Technology Services Company, Inc. into RCM Technologies (USA), Inc., in form and substance satisfactory to Lender.

 

28.   The Borrower hereby represents, warrants and certifies to the Bank that no Event of Default or Unmatured Event of Default has occurred and is presently existing under the Loan Documents.

 

29.   This Amendment (a) shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania; (b) shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns; (c) may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; and (d) may only be amended or modified pursuant to a writing signed by the parties hereto.

 

30.   THE BORROWER HEREBY WAIVES ANY AND ALL RIGHTS WHICH IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST THE BANK WITH RESPECT TO THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO.

 

31.   The Borrower hereby agrees that it will pay, or cause to be paid or reimburse the Bank for, all of the Bank’s costs and expenses in connection with this Amendment, including without limitation the fees of its legal counsel.

 

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized, as of the 12th day of December, 2014.

BORROWER :	RCM TECHNOLOGIES, INC.   By: /s/ Kevin D. Miller   Print Name: Kevin D. Miller Title: CFO
	RCM TECHNOLOGIES (USA), INC .   By: /s/ Kevin D. Miller   Print Name: Kevin D. Miller Title: CFO
	PROGRAMMING ALTERNATIVES OF MINNESOTA, INC.   By: /s/ Kevin D. Miller   Print Name: Kevin D. Miller Title: CFO
	RCMT DELAWARE, INC.   By: /s/ Kevin D. Miller   Print Name: Kevin D. Miller Title: CFO
	RCM TECHNOLOGIES CANADA CORP .   By: /s/ Kevin D. Miller   Print Name: Kevin D. Miller Title: CFO
	BUSINESS SUPPORT GROUP OF MICHIGAN, INC.   By: /s/ Kevin D. Miller   Print Name: Kevin D. Miller Title: CFO

AGENT :

CITIZENS BANK OF PENNSYLVANA ,

as Administrative Agent and Arranger

 

By:   /s/ Derrick R. Davis                                                           

 

Print Name: Derrick R. Davis

Title: Senior Vice President                                                                         

 

 

 

 

LENDERS :                                                                  CITIZENS BANK OF PENNSYLVANIA, as

Lender

By:   /s/ Derrick R. Davis                                                            

                                                         

 

 

EXHIBIT A

 

FORM OF COMPLIANCE CERTIFICATE

 

EXHIBIT 6.11

 

COMPLIANCE CERTIFICATE

 

 

 

_______________ , 20__

           

 

Derrick R. Davis, Senior Vice President

Citizens Bank of Pennsylvania

2001 Market Street

Suite 600

Philadelphia, Pennsylvania  19103

 

Dear Mr. Davis:

 

I have reviewed the Second Amended and Restated Loan and Security Agreement dated February __, 2009, between RCM Technologies, Inc. and its subsidiaries (collectively, the “Borrower”) and Citizens Bank of Pennsylvania, as heretofore amended (collectively, the “Loan Agreement”).

 

I hereby certify AS OF _________________, 20___ that (a) the Borrower has observed, performed and complied with each and every one of its respective undertakings contained in the Loan Agreement, and (b) there does not exist any Event of Default or any Unmatured Event of Default (as each such term is defined in the Loan Agreement).

 

Attached hereto is a copy of the calculations required by Section 6.11 of the Loan Agreement showing compliance with Section 6.9 of the Loan Agreement.

 

Sincerely,
Name:
Title:

 

 

RCM Technologies, Inc.
Covenant Compliance
As of		, 20
($ in thousands)

 

*All terms utilized herein have meanings ascribed to them in the Loan Agreement

 

6.9(a)	Fixed Charge Ratio (tested on rolling four quarter basis)
A.	If there is no Total Funded Debt outstanding in the fiscal quarter in which a Distribution is paid or in the fiscal quarter immediately following such fiscal quarter:					$
	The Sum Of :
	EBITDA,					$
	150% of paid Distributions (excluding the Permitted Dividend)					$
	Total					$
	Divided By Sum Of :
	Interest Expense					$
	Income Taxes Paid					$
	Scheduled Principal Payments					$
	Unfunded Capital Expenditures					$
	Distributions Paid (excluding the Permitted Dividend)					$
			Total			$
	Actual Fixed Charge Ratio					$
	Maximum Fixed Charge Ratio
	Compliance						Yes/No
B.	If there is Total Funded Debt outstanding in the fiscal quarter in which a Distribution is paid or in the fiscal quarter immediately following such fiscal quarter:
	EBITDA					$
	Divided By The Sum Of :
	(i)	Interest Expense				$
	(ii)	Income Taxes Paid				$
	(iii)	Scheduled Principal Payments				$
	(iv)	Unfunded Capital Expenditures				$
	(v)	Paid Distributions (excluding the Permitted Dividend)				$
				Total		$

 

	(In the event an amount attributable to a paid Distribution was added to the numerator of the Fixed Charge Ratio pursuant to subparagraph A. above during the testing period in question, that amount shall continue to be included in the numerator for purposes of determining the Fixed Charge Ratio pursuant to this subparagraph B).
	Minimum Fixed Charge Ratio
	Compliance				Yes/No
6.9(b)	Capital Expenditures and Purchase Money Financing (tested on rolling four quarter basis)
	Total Capital Expenditures			$
	Total Purchase Money Financing (excluding Acquisitions)			$
		Total		$
	Maximum Capital Expenditures and Purchase
	Money Financing			$
	Compliance				Yes/No
6.9(c)	Total Funded Debt to EBITDA (tested on rolling four quarter basis)
	Total Funded Debt			$
	EBITDA			$
	Actual Total Funded Debt to EBITDA			$
	Maximum Total Funded Debt to EBITDA
	Compliance				Yes/No
6.9(c)	Modified Current Ratio (if applicable)
	The Sum Of:
	Cash			$
	Cash Equivalent			$
	Accounts Receivable			$
	TOTAL			$
	Divided by the Sum of:
	Outstanding Revolving Credit Loans			$
	Letter of Credit Outstandings			$
	TOTAL			$
	Modified Current Ratio Compliance				Yes/No

 

 

RCM TECHNOLOGIES, INC.

 

2014 OMNIBUS EQUITY COMPENSATION PLAN

 

STOCK UNIT AGREEMENT

 

The Compensation Committee of the Board of Directors of RCM Technologies, Inc. has determined to grant to you a stock unit award under the RCM Technologies, Inc. 2014 Omnibus Equity Compensation Plan (the “ Plan ”) that is convertible into shares of common stock, par value $0.05 per share, of RCM Technologies, Inc.  The terms of the grant are set forth in the Stock Unit Award Agreement (the “ Grant ”) provided to you.  The following provides a summary of the key terms of the Grant; however, you should read the entire Grant, along with the terms of the Plan, to fully understand the Grant.

 

 

 

 

*           Except as provided in the Grant in the event of a Change in Control (as defined in the Plan) or termination of the Participant’s employment or service with the Company (as defined in the Plan) by the Company on account of disability (as defined in the Grant) or death, the Participant must be employed by, or providing service to, the Company on December 11, 2017 for the stock units to vest on such date.

 

RCM TECHNOLOGIES, INC.

 

2014 OMNIBUS EQUITY COMPENSATION PLAN

 

STOCK UNIT AWARD AGREEMENT

 

This STOCK UNIT AWARD AGREEMENT (the “ Agreement ”), dated as of December 11, 2014 (the “ Date of Grant ”), is delivered by RCM Technologies, Inc. (“ RCM ”) to _______________ (the “ Participant ”).

 

RECITALS

 

A.           The RCM Technologies, Inc. 2014 Omnibus Equity Compensation Plan (the “ Plan ”) provides for the grant of stock units in accordance with the terms and conditions of the Plan.

 

B.           The Compensation Committee (the “ Committee ”) of the Board of Directors of RCM has decided to make a stock unit grant on the Date of Grant that will be convertible into an equivalent number of shares of common stock of RCM, par value $0.05 per share, (the “ RCM Stock ”) as an inducement for the Partcipant to promote the best interests of RCM and its stockholders.  The Participant may receive a copy of the Plan by contacting Gini DiBartolomeo.

 

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

 

1.   Stock Unit Grant .  Subject to the terms and conditions set forth in this Agreement and the Plan, RCM hereby grants to the Participant _______ restricted stock units (the “ Stock Units ”).  The Stock Units will become vested and convertible into shares of RCM Stock if, and only to the extent that, the vesting conditions set forth in Paragraph 3 of this Agreement are met and the other terms and conditions of this Agreement are satisfied.  Each Stock Unit shall be a phantom right and shall entitle the Participant to receive one share of RCM Stock on the applicable distribution date, as described in Paragraph 4 below.

 

2.   Stock Unit Account .  RCM shall establish and maintain a Stock Unit account as a bookkeeping account on its records (the “ Stock Unit Account ”) for the Participant and shall record in such Stock Unit Account the number of Stock Units granted to the Participant.  The Participant shall not have any interest in any fund or specific assets of RCM by reason of this grant or the Stock Unit Account established for the Participant.

 

3.   Vesting of Stock Units .

 

(a)   Except as provided in subparagraph (b) or (c) below, the Stock Units shall become fully vested on December 11, 2017 (the “ Vesting Date ”), provided that the Participant remains continuously employed by, or providing services to, the Company (as defined in the Plan) from the Date of Grant through the Vesting Date.

 

 

(b)   Notwithstanding subparagraph (a) above, if the Participant’s employment or service with the Company terminates on account of a termination by the Company on account of the Participant’s disability (as determined by the Committee) or death, and the Participant has been continuously employed by, or providing service to, the Company from the Date of Grant to the date of such termination of employment or service by the Company, the Stock Units shall become fully vested on the date of such termination of employment or service (the “ Separation Date ”).

 

(c)   Notwithstanding subparagraphs (a) and (b) above, if a Change in Control occurs prior to the Vesting Date and the Separation Date and the Participant has been continuously employed by, or providing service to, the Company from the Date of Grant to the date of the Change in Control, the Stock Units shall become fully vested on the date of the Change in Control (the “ Change in Control Date ”).

 

(d)   If the Participant’s employment or service with the Company terminates for any reason other than that provided in subparagraph (b) above prior to the date on which the Stock Units are fully vested, the unvested Stock Units shall be forfeited and the Participant shall not have any rights to any corresponding shares of RCM Stock.

 

4.   Time and Form of Payment with Respect to Stock Units .  The Participant (or, in the event of death, the Participant’s estate) shall receive a distribution with respect to the Stock Units that become vested as described in Paragraph 3 above within fourteen (14) days following the earlier to occur of the (i) Vesting Date, (ii) Separation Date, or (iii) Change in Control Date.  The vested Stock Units will be distributed in shares of RCM Stock, with each vested Stock Unit equivalent to one share of RCM Stock.  Any Stock Units not vested because of the failure to satisfy the vesting condition are forfeited as described in Paragraph 3 above.  The date on which the vested Stock Units are distributed as provided in this Paragraph 4 is hereinafter referred to as the “ Distribution Date ”.

 

5.   Dividend Equivalents .  Should any dividend or other distribution payable, other than in shares of RCM Stock, be declared and paid with respect to the shares of RCM Stock during the period between (a) the Date of Grant and (b) the Distribution Date ( i.e. shares of RCM Stock issuable under the Stock Units are not issued and outstanding for purposes of entitlement to the dividend or distribution), RCM shall credit to a dividend equivalent book account (the “ Dividend Equivalent Account ”) the value of the dividends or distributions that would have been paid if the outstanding Stock Units credited to the Participant’s Stock Unit Account at the time of the declaration of the dividend or other distribution were outstanding shares of RCM Stock.  At the same time that the corresponding Stock Units are converted to shares of RCM Stock and distributed to the Participant (or, in the event of death, the Participant’s estate) as set forth in Paragraph 4, RCM shall pay to the Participant (or, in the event of death, the Participant’s estate) a lump sum cash payment equal to the value of the dividends or other distributions credited to the Participant’s Dividend Equivalent Account that correspond to such vested Stock Units; provided, however, that any dividends or other distributions that were credited to the Participant’s Dividend Equivalent Account that are attributable to Stock Units that have been forfeited as provided in Paragraph 3 above shall be forfeited and not payable to the Participant (or, in the event of death, the Participant’s estate).  No interest shall accrue on any dividend equivalents credited to the Participant’s Dividend Equivalent Account.

 

6.   Change in Control .  Subject to Paragraph 3(c) above, the provisions set forth in the Plan applicable to a Change in Control shall apply to the Stock Units, and, in the event of a Change in Control, the Committee may take such actions as it deems appropriate pursuant to the Plan and is consistent with the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”) and this Agreement.

 

7.   Acknowledgment by Participant .  By accepting this grant, the Participant acknowledges that with respect to any right to distribution and payment pursuant to this grant, the Participant is and shall be an unsecured general creditor of RCM without any preference as against other unsecured general creditors of RCM, and the Participant hereby covenants for himself or herself, and anyone at any time claiming through or under the Participant, not to claim any such preference, and hereby disclaims and waives any such preference which may at any time be at issue, to the fullest extent permitted by applicable law.  The Participant also hereby agrees to be bound by the terms and conditions of the Plan and this Agreement.  The Participant further agrees to be bound by the determinations and decisions of the Committee with respect to this grant and the Plan and the Participant’s rights to benefits under this grant and the Plan, and agrees that all such determinations and decisions of the Committee shall be binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under this grant and the Plan on behalf of the Participant.

 

8.   Restrictions on Issuance or Transfer of Shares of RCM Stock .

 

(a)           The obligation of RCM to deliver shares of RCM Stock on the Distribution Date with respect to the Stock Units in which the Participant has become vested shall be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration or qualification of the shares of RCM Stock upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance of shares of RCM Stock, the shares of RCM Stock may not be issued in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.  The issuance of shares of RCM Stock and the payment of cash or other consideration to the Participant (or, in the event of death, the Participant’s estate) pursuant to this grant is subject to any applicable taxes and other laws or regulations of the United States or of any state having jurisdiction thereof.

 

(b)           As a condition to the receipt of any shares of RCM Stock upon distribution of the vested Stock Units, the Participant agrees to be bound by RCM’s policies, including, but not limited to, RCM’s insider trading policy, regarding the limitations on the transfer of such shares, and understands that there may be certain times during the year that the Participant will be prohibited from selling, transferring, pledging, donating, assigning, mortgaging, hypothecating or otherwise encumbering the shares.

 

9.   Grant Subject to Plan Provisions .  This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan.  In the event of any contradiction, distinction or difference between this Agreement and the terms of the Plan, the terms of the Plan will control.  Except as otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.  This Agreement is subject to the interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (a) rights and obligations with respect to withholding taxes, (b) the registration, qualification or listing of the shares of RCM Stock, (c) changes in capitalization of RCM, and (d) other requirements of applicable law.  The Committee shall have the authority to interpret and construe this grant pursuant to the terms of the Plan, its decisions shall be conclusive as to any questions arising hereunder and the Participant’s acceptance of this grant is the Participant’s agreement to be bound by the interpretations and decisions of the Committee with respect to this grant and the Plan.

 

11.   No Rights to Continued Employment or Service .  This grant shall not confer upon the Participant any right to be retained in the employment or service of the Company and shall not interfere in any way with the right of the Company to terminate the Participant’s employment or service at any time.  The right of the Company to terminate at will the Participant’s employment or service at any time for any reason is specifically reserved.

 

12.   Assignment and Transfers .  Prior to the actual issuance of the shares of RCM Stock under the Stock Units which vest hereunder, the Participant may not transfer any interest in the Stock Units or dividend equivalents or the underlying shares of RCM Stock or pledge or otherwise hedge the sale of those units, dividend equivalents or shares, including (without limitation) any short sale or any acquisition or disposition of any put or call option or other instrument tied to the value of those shares.  However, any shares which vest hereunder but otherwise remain unissued at the time of the Participant’s death shall be transferred pursuant to the provisions of the Participant’s will or the laws of inheritance.  Any attempt to transfer, assign, pledge, or encumber the Stock Units or dividend equivalents under this grant by the Participant shall be null, void and without effect.  The rights and protections of RCM hereunder shall extend to any successors or assigns of RCM.  This Agreement may be assigned by RCM without the Participant’s consent.

 

13.   Withholding . The Participant shall be required to pay to the Company, or make other arrangements satisfactory to the Company to provide for the payment of, any federal, state, local or other taxes that the Company is required to withhold with respect to the grant, vesting and distribution of the Stock Units and dividend equivalents.  Subject to Committee approval, the Participant may elect to satisfy any tax withholding obligation of the Company with respect to the distribution of shares of RCM Stock pursuant to the Stock Units that are vested by having shares of RCM Stock withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state, local and other tax liabilities.  Notwithstanding anything to the contrary herein or the Plan, until the Participant has satisfied the Company’s withholding obligation with respect to the shares of RCM Stock as described in this Paragraph 13, the Participant shall not have any rights to sell or transfer any shares of RCM Stock that have been distributed to the Participant pursuant to Paragraph 4.

 

14.   Effect on Other Benefits .  The value of shares of RCM Stock and dividend equivalents distributed with respect to the Stock Units shall not be considered eligible earnings for purposes of any other plans maintained by RCM or the Company.  Neither shall such value be considered part of the Participant’s compensation for purposes of determining or calculating other benefits that are based on compensation, such as life insurance.

 

15.   Applicable Law .  The validity, construction, interpretation and effect of this grant shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to the conflicts of laws provisions thereof.

 

16.   Notice .  Any notice to RCM provided for in this instrument shall be addressed to RCM in care of the President at the corporate headquarters of RCM, and any notice to the Participant shall be addressed to such Participant at the current address shown on the payroll records of RCM, or to such other address as the Participant may designate to RCM in writing.  Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

 

17.   Section 409A of the Code .  This grant is intended to be exempt from the requirements of section 409A of the Code in reliance on the short-term deferral exception under section 409A of the Code.  Notwithstanding the foregoing, if any Stock Units are subject to the requirements of section 409A of the Code it is intended that this Agreement comply with the requirements of section 409A of the Code with respect to such Stock Units and this Agreement shall be interpreted and administered to avoid any penalty sanctions under section 409A of the Code.  If any distribution or payment cannot be provided or made at the time specified herein, then such distribution or payment shall be provided in full at the earliest time thereafter when such sanctions cannot be imposed, including if the distribution is subject to the requirements of section 409A of the Code and is paid to the Participant on account of (i) separation from service, delaying such distribution until six (6) months following the date of the Participant’s separation from service if the Participant is a specified employee (as defined in section 409A of the Code and its corresponding regulations) at such time and (ii) a change in control, such distribution will only be paid on account of a change in control if such is a change in control within the meaning of section 409A of the Code and its corresponding regulations.  In no event may the Participant, directly or indirectly, designate the calendar year of distribution or payment.

 

18.   Contents of Agreement; Amendment .  This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the parties hereto.  Any such written amendment must be approved by the Committee to be effective against RCM.  In addition, the terms set forth herein as it relates to the ability for the Participant to become vested in the Stock Units and dividend equivalents shall control with respect to the Participant’s rights with respect to the Stock Units and corresponding dividend equivalents, and any contrary provision set forth in any agreement (whether oral or written) between the Participant and the Company that relates to the earning and/or vesting of equity rights shall not apply to this grant.

 

IN WITNESS WHEREOF, RCM has caused its duly authorized officers to execute and attest this instrument, and the Participant has placed his or her signature hereon, effective as of the Date of Grant.

 

RCM TECHNOLOGIES, INC.

 

 

By:                                                       

 

 

 

 

I hereby accept the grant of Stock Units described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement.  I hereby further agree that all of the decisions and determinations of the Committee shall be final and binding.

 

 

                                                                                                                                                                                

Participant

 

 

                                                                                                                                                                              

Date

 

RCM Technologies, Inc.	Tel:  856.356.4500	Corporate Contacts:
2500 McClellan Avenue	Fax: 856.356.4600	Rocco Campanelli
Pennsauken, NJ 08109	info@rcmt.com	President & CEO
	www.rcmt.com	Kevin D. Miller
		Chief Financial Officer

 

P R E S S   R E L E A S E

RCM TECHNOLOGIES, INC. DECLARES

SPECIAL CASH DIVIDEND OF $2.00 PER SHARE

 

Pennsauken, NJ – December 15, 2014 -- RCM Technologies, Inc. (NasdaqGM: RCMT), a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced engineering, information technology and specialty health care services, today announced that its Board of Directors declared a special cash dividend (the “Dividend”) of $2.00 per share, payable on December 30, 2014 to stockholders of record at the close of business on December 26, 2014.

 

Rocco Campanelli, President and CEO of RCM Technologies, Inc., commented: “Based on continued operational momentum in all three business units, and an effort to work towards a more efficient long-term capital structure, the Board of Directors authorized a special dividend of $2.00 per share to be paid on or about December 30th. We are excited to culminate what we expect to be our best yearly operating income performance in the past twelve years by returning significant capital to shareholders in 2014.”

 

Kevin Miller, Chief Financial Officer, added: “Due to the favorable cash generating characteristics of RCM’s business model, the Board believes a target long-term capital structure generally in the range of 1.0x to 2.0x net debt/EBITDA will allow the Company to invest internally for profitable organic growth, consider acquisitions that are a strategic fit to RCM’s core business, and, when appropriate, return capital to shareholders as part of comprehensive capital allocation framework that is reviewed quarterly by the Board. The Company recently expanded its credit facility to $35.0 million to accommodate the short-term cash flow requirements associated with this special dividend. Approximately $0.40 per share of the special dividend will receive the tax advantageous characterization of return of capital to shareholders.”

 

About RCM

RCM Technologies, Inc. is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced information technology and engineering services.   RCM is an innovative leader in the delivery of these solutions to commercial and government sectors.  RCM is also a   provider of specialty healthcare services to major health care institutions and educational facilities. RCM’s offices are located in major metropolitan centers throughout North America.  Additional information can be found at www.rcmt.com .

 

 

The Statements contained in this release that are not purely historical are forward-looking statements within the Private Securities Litigation Reform Act of 1995 and are subject to various risks, uncertainties and other factors that could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements.  These statements often include words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “believe,” “plan,” “seek,” “could,” “can,” “should” or similar expressions.  In addition, statements that are not historical should also be considered forward-looking statements. These statements are based on assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances.  Forward-looking statements include, but are not limited to, those relating to demand for the Company’s services and the momentum of our business, expected demand for our services and expectations regarding our revenues and operating performance, the Company's long-term capital structure, the Company’s ability to achieve and manage organic growth, the Company’s consideration of acquisitions and initiatives to enhance shareholder value and returns and general economic factors. Such statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors, which may cause actual events to be materially different from those expressed or implied by such forward-looking statements.  Risk, uncertainties and other factors may emerge from time to time that could cause the Company’s actual results to differ from those indicated by the forward-looking statements. Investors are directed to consider such risks, uncertainties and other factors described in documents filed by the Company with the Securities and Exchange Commission. The Company assumes no obligation (and expressly disclaims any such obligation) to update any forward-looking statements contained in this release as a result of new information or future events or developments, except as may be required by law.