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STOCK PURCHASE AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
THE CONSORTIUM
AND
THE SHAREHOLDERS OF
THE CONSORTIUM
Dated as of March 1, 1996
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TABLE OF CONTENTS
Page
1. DEFINITIONS................................................................................... 1
2. PURCHASE AND SALE OF SHARES OF ACQUIREE....................................................... 3
3.A. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND MESSRS.
BLAIRE AND ▇▇▇▇▇▇...................................................................................... 5
3.B. REPRESENTATIONS AND WARRANTIES OF MINORITY
SHAREHOLDERS........................................................................................... 14
4. REPRESENTATIONS AND WARRANTIES OF RCM......................................................... 16
5. COVENANTS OF THE PARTIES...................................................................... 23
6. THE CLOSING................................................................................... 28
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND
ACQUIREE SHAREHOLDERS.................................................................................. 31
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM.................................................... 33
9. INDEMNIFICATION........................................................................................ 37
10. TERMINATION............................................................................................ 39
11. NOTICES....................................................................................... 39
12. ARBITRATION................................................................................... 41
13. MISCELLANEOUS................................................................................. 41
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LIST OF SCHEDULES
3.A.2(a) Audited Financial Statements for the fiscal years ended
December 31, 1995, 1994 and 1993
3.A.3 Undisclosed Liabilities of Acquiree
3.A.5 Accounts Receivable of Acquiree as of December 31, 1995
3.A.6 Material adverse changes
3.A.7 Litigation
3.A.9 Articles of Incorporation, Bylaws and Contracts of
Acquiree
3.A.10 Tax information
3.A.11 All material Contracts and Agreements of Acquiree
3.A.12 Liens, encumbrances and general description of all real
property in which Acquiree has an ownership interest
3.A.13 Licenses, trademarks and trade names of Acquiree
3.A.14 Consents to be obtained by Acquiree
3.A.15 Capitalization of Acquiree
3.A.18 Messrs. Blaire and ▇▇▇▇▇▇' Obligation
3.A.19 Approvals required to be obtained by Acquiree
Shareholders
3.A.20 Number and names of employees and compensation of all
directors and officers of Acquiree - identifies all
employee benefit plans
3.A.21 Compliance with environmental and conservation laws
3.A.22 List of all insurance policies of Acquiree
3.A.23 List of all bank accounts maintained or for the benefit
of Acquiree
3.A.24 List of 10 largest customers of Acquiree, based on dollar
volume of income for Fiscal 1995
4.1 Articles of Incorporation and Bylaws of RCM
4.3 Capitalization of RCM
4.4 Undisclosed Liabilities of RCM
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4.5 Subsidiaries of RCM
4.6 Material adverse changes
4.7 Litigation
4.9 Tax Information
4.10 Title to Property and Related Matters
4.11 Licenses, trademarks and trade names of RCM
4.12 Number and names of employees and compensation of all
directors and officers of RCM - identifies all employee
benefit plans
4.13 Compliance with environmental and conservation laws
4.14 List of all insurance policies of RCM
4.15 List of all bank accounts maintained or for the benefit
of RCM
4.16 List of 10 largest customers of RCM, based on dollar
volume of income for the fiscal year ended September 30,
1995
4.17 Consents to be obtained by RCM
4.21 All material Contracts and Agreements of RCM
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LIST OF EXHIBITS
Exhibit "A" Escrow Agreement
Exhibit "B" Registration Rights Agreement
Exhibit "C" Standstill and Shareholders' Agreement
Exhibit "D" Blaire Employment Agreement
Exhibit "E" ▇▇▇▇▇▇ Employment Agreement
Exhibit "F" Investor Representation Letter
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement" ) is made and
entered into as of this 1st day of March 1996, by and among RCM Technologies,
Inc., a Nevada corporation ("RCM"); The Consortium, a New Jersey corporation
(the "Acquiree"); and those shareholders of Acquiree identified in Section 1 of
this Agreement (the "Acquiree Shareholders").
RECITALS:
WHEREAS, the Acquiree Shareholders own in the aggregate one hundred
percent (100%) of the issued and outstanding common stock of the Acquiree (the
"Acquiree Shares"); and
WHEREAS, the Acquiree Shareholders desire to sell the Acquiree
Shares and RCM desires to purchase the Acquiree Shares, each upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. DEFINITIONS.
(a) The foregoing RECITALS are true and correct, and are
incorporated herein and made a part hereof.
(b) For purposes of this Agreement, the terms set forth
below shall have the following meanings:
Acquiree..............................................................
The Consortium, a New Jersey
corporation
Acquiree............................................................
Shareholders
Those individuals consisting of
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, who in the aggregate own
100% of the outstanding capital
stock of The Consortium.
Blaire and ▇▇▇▇▇▇................................................
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇,
individuals who in the aggregate own
10,212 shares (93.4%) of Acquiree.
Code..........................................................
The Internal Revenue Code of 1986,
as amended.
Closing......................................................
The transaction of events set forth
in Section 6 hereof.
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Closing Date.................................................
The day on which the Closing is held
as set forth in Section 6 hereof.
Closing.......................................................
Financial Statements
Unaudited financial statements of
the Acquiree for the interim period
from January 1, 1996 through the
Closing Date.
Escrow Shares.................................................
The portion of the RCM Shares
delivered to escrow pursuant to
Section 2.4.
Excess Tax.................................................
Liability
That amount of tax liability
calculated in accordance with
Section 2.3.
Exchange Act..............................................
The Securities Exchange Act of 1934,
as amended.
Financial..............................................
Statements
Audited financial statements of the
Acquiree for the fiscal years ended
December 31, 1995, December 31, 1994, and December 31, 1993 prepared in
compliance with the requirements of generally accepted accounting principles.
Interim Financial...................................
Statements
Unaudited financial statements of the Acquiree for the interim period from
January 1, 1996 through January
31, 1996.
Minority.........................................
Shareholders
Those individuals consisting of
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, who in the
aggregate own 715 shares (6.6%) of
the outstanding capital stock of
Acquiree.
RCM Shares.....................................
6.5 million shares of RCM Common
Stock to be issued to the Acquiree Shareholders pursuant to the terms of this
Stock Purchase Agreement, subject to adjustments as provided herein.
RCM...................................................
RCM Technologies, Inc., a Nevada corporation.
RCM Common Stock......................................
Common stock, $.05 par value per
share, of RCM.
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S Revocation Date.............................................
The date upon which the revocation
of the S Corporation status of
Acquiree is deemed effective for
federal tax purposes.
SEC........................................................
The Securities and Exchange
Commission.
Securities Act.............................................
The Securities Act of 1933, as
amended.
2. PURCHASE AND SALE OF SHARES OF ACQUIREE.
2.1 Purchase and Sale of Shares of Acquiree. Subject to the
terms and conditions of this Agreement, on the Closing Date, the Acquiree
Shareholders will sell, convey, assign, transfer and deliver the Acquiree Shares
to RCM, and RCM shall purchase, acquire and accept from the Acquiree
Shareholders the Acquiree Shares, which shall constitute one hundred percent
(100%) of the outstanding capital stock of Acquiree.
2.2 Purchase Consideration.
(a) On the Closing Date, (i) Acquiree Shareholders shall
deliver to RCM certificates representing the Acquiree Shares; and (ii) RCM shall
cause to be issued certificates in the name of each of the Acquiree Shareholders
in amounts as set forth in Schedule 2.2(a) representing, in the aggregate, 6.5
million shares of RCM's Common Stock (the "RCM Shares"), of which Messrs. Blaire
and ▇▇▇▇▇▇ shall deliver into escrow an aggregate 1.625 million shares of RCM's
Common Stock pursuant to Section 2.4 ("Escrow Shares").
(b) The RCM Shares shall be divided among the Acquiree
Shareholders in the same proportion as they own the Acquiree Shares. No other
consideration shall be payable to the Acquiree Shareholders in connection with
this Agreement.
2.3 Long-Term Contingency Regarding Federal Income
Taxes.
(a) The Acquiree, Acquiree Shareholders and RCM agree and
acknowledge that the number of RCM Shares to be paid to the Acquiree
Shareholders has been determined based upon the assumption that the tax
liability incurred by Acquiree prior to Closing associated with the recognition
of income resulting from the change in accounting method of Acquiree from cash
to accrual prior to Closing will be $1.1 million.
(b) The number of RCM Shares shall be reduced (as set forth in
this subsection (b)) by the amount by which RCM's aggregate federal and state
tax liability associated with the change in accounting method of Acquiree from
cash to accrual as
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paid out over each of the tax periods up to and including October 31, 1998,
exceeds $1.1 million (the "Excess Tax Liability"). If there is no Excess Tax
Liability, there shall be no adjustment to the RCM Shares. Within 30 days after
the date the federal tax returns for RCM for the fiscal year ended October 31,
1998 are filed, RCM shall send a notice (the "Notice") to the Acquiree
Shareholders providing in reasonable detail its calculation of the Excess Tax
Liability. Acquiree Shareholders shall have 30 days following such Notice in
which to review the calculation of the Excess Tax Liability and to notify RCM if
it disputes the amount thereof ("Dispute Notice"). In the event Acquiree
Shareholders do not provide the Dispute Notice timely, it shall be assumed that
they consent to the calculation of the Excess Tax Liability. If the Dispute
Notice is provided timely, and the parties are unable to resolve such dispute
within 30 days of RCM's receipt of such Dispute Notice, then such dispute shall
be handled in accordance with the provisions of Section 12 hereafter.
(c) The Acquiree Shareholders shall have the option to pay to
RCM in cash an amount equal to the Excess Tax Liability no less than 45 days
after its receipt of the Notice. If the Acquiree Shareholders do not pay the
Excess Tax Liability in cash prior to such 45th day, then the number of RCM
Shares shall be reduced by cancellation of a sufficient number of Escrow Shares
as shall have a value equal to the Excess Tax Liability, in accordance with the
Escrow Agreement (as defined in Section 2.4 of this Agreement) and the balance
of the Escrow Shares held in Escrow to secure such Excess Tax Liability shall be
released from Escrow and returned to the Acquiree Shareholders. For purposes of
this Agreement, the term "value" shall be determined by the average closing
price of RCM Common Stock either on The NASDAQ Stock Market or other principal
exchange upon which RCM Common Stock is regularly traded, for the 20 trading
days immediately preceding the date the Acquiree Shareholders determine the form
of payment of the Excess Tax Liability under this subparagraph (c).
2.4 Escrow Agreement. Messrs. Blaire and ▇▇▇▇▇▇ shall deposit
in escrow the Escrow Shares immediately upon issuance to Messrs. Blaire and
▇▇▇▇▇▇ pursuant to an escrow agreement in the form of Exhibit "A" attached
hereto and made a part hereof (the "Escrow Agreement"). The Escrow Shares shall
be deemed collateral to ensure payment of the Excess Tax Liability as provided
in Section 2.3 and for the indemnification obligations of Messrs. Blaire and
▇▇▇▇▇▇ pursuant to Section 10 of this Agreement.
3.A. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND MESSRS.
BLAIRE AND ▇▇▇▇▇▇. The Acquiree and Messrs. Blaire and ▇▇▇▇▇▇,
jointly and severally, as a material inducement to RCM to enter
into this Agreement and consummate the transactions contemplated
hereby, make the following representations and warranties to RCM
which representations and warranties are true and correct in all
material respects at this date, and will be true and correct in all
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material respects on the Closing Date as though made on and as of
such date.
3.A.1 Shareholders of Acquiree. The Acquiree Shareholders are,
and will be on the Closing Date, the sole owners, of record and beneficially, of
all the issued and outstanding shares of the Acquiree's capital stock.
Acquiree does not own more than 5% percent of the issued and
outstanding capital stock of any other corporation or an equity interest in any
other entity.
3.A.2 Financial Statements.
(a) The Audited Financial Statements for the fiscal years
ended December 31, 1994 and 1993 ("1994 and 1993 Financial Statements") have
been attached as Schedule 3.A.2(a). The 1994 and 1993 Financial Statements and
the financial information contained therein present fairly the financial
condition of the Acquiree for the periods covered and have been prepared in
accordance with generally accepted accounting principles, consistently applied.
(b) The Audited Financial Statements for the fiscal year ended
December 31, 1995 ("1995 Financial Statements") will be delivered to RCM at or
prior to Closing. The 1995 Financial Statements and the financial information
contained therein will present fairly the financial condition of the Acquiree
for the periods covered and will be prepared in accordance with generally
accepted accounting principles, consistently applied.
(c) The Interim Financial Statements and Closing Financial
Statements will be prepared on an unaudited basis and delivered to RCM at or
prior to Closing and within 60 days of Closing, respectively. The Interim
Financial Statements and Closing Financial Statements and the financial
information contained therein will present fairly the financial condition of the
Acquiree for the interim periods covered and will be prepared in accordance with
generally accepted accounting principles, consistently applied.
(d) The books and records of Acquiree,
financial and other, are in all material respects complete and correct and have
been maintained in accordance with good business and accounting practices.
3.A.3 Undisclosed Liabilities. Acquiree does not have any
liabilities or obligations of any nature, fixed or contingent, that will not be
shown or otherwise provided for in the Financial Statements, except (a) as set
forth on Schedule 3.A.3, (b) for any tax liabilities incurred in connection with
Acquiree's conversion from an S Corporation to a C Corporation prior to
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Closing and the related change from the cash method to the accrual method of
accounting for federal income tax purposes, and (c) for liabilities and
obligations arising subsequent to the date of the Financial Statements in the
ordinary course of business, none of such liabilities referred to in this clause
(c) will individually or in the aggregate be materially adverse to the business
or financial condition of the Acquiree. There are no material loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5 of
the Financial Accounting Standards Board) of the Acquiree that will not be
adequately provided for.
3.A.4 RCM Shares to Constitute Restricted Securities. Messrs
Blaire and ▇▇▇▇▇▇ represent and warrant: (a) that they have reviewed the
quarterly, annual and periodic reports of RCM, as filed by RCM with the SEC
pursuant to the Exchange Act, and that they have such knowledge and experience
in financial and business matters that they are capable of utilizing the
information set forth therein concerning RCM to evaluate the risks of investing
in the RCM Shares; (b) that they have been advised that the RCM Shares to be
issued to them by RCM constitute "restricted securities" as defined in Rule 144
promulgated under the Securities Act, and accordingly, have not been and will
not be registered under the Securities Act except as otherwise set forth in this
Agreement, and, therefore, they may not be able to sell or otherwise dispose of
such RCM Shares except if the RCM Shares are subject to an effective
registration statement filed with the SEC, in compliance with Rule 144 or
otherwise pursuant to an exemption from registration under the Securities Act;
(c) that the RCM Shares so issued are being acquired by them for their own
benefit and on their own behalf for investment purposes and not with a view to,
or for resale in connection with, a public offering or re-distribution thereof;
(d) that the RCM Shares so issued will not be resold (i) without registration
thereof under the Securities Act (unless in the opinion of counsel acceptable to
RCM, an exemption from such registration is available) or (ii) in violation of
any law; and (e) that the certificate or certificates representing the RCM
Shares to be issued will be imprinted with a legend in form and substance as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF
EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE
COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION."
and RCM is hereby authorized to notify its transfer agent of the status of the
Shares, and to take such other action including, but not limited to, the placing
of a "Stop Transfer" order on the books
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and records of RCM's transfer agent to insure compliance with the
foregoing.
3.A.5 Accounts Receivable. Attached hereto as Schedule 3.A.5
is a list of all accounts receivable of Acquiree as of December 31, 1995 and
aging schedule pertaining thereto. All of the accounts receivable of Acquiree
now and on the Closing Date, are bona fide accounts receivable of Acquiree
representing the sales price of (or other sums or fees receivable for or in
respect of) goods, merchandise, or services sold or performed by Acquiree in
valid transactions in the regular course of its business to or for the benefit
of its customers. Such accounts receivable, subject to reserves, if any,
established within the Financial Statements, are not uncollectible or subject to
offset or counterclaim or otherwise in controversy.
3.A.6 Material Adverse Changes. Except as specifically stated
in Schedule 3.A.6 or as contemplated or required by this Agreement, from
December 31, 1995 to the date of this Agreement, the business of the Acquiree
has been operated in the ordinary course and there has not been:
(a) Any materially adverse changes in the business,
condition (financial or otherwise), results of operations, properties, assets,
liabilities, earnings or net worth of the Acquiree for such period or at any
time during such period;
(b) Any material damage, destruction or loss (whether or not covered by
insurance) affecting the Acquiree or its assets, properties or
business;
(c) Any cancellation or material breaches on any existing contract of which
Acquiree is a party that would have a material adverse effect on the business of
Acquiree;
(d) To the knowledge of Acquiree and Acquiree
Shareholders, any statute, rule, regulation or order adopted by any governmental
body, agency or authority that materially and adversely affects the Acquiree or
its business or financial condition;
(f) Any payment of bonuses or accrued salaries out of the
ordinary course of business or agreements to materially increase the rate or
terms of compensation payable or to become payable by Acquiree to its directors,
officers or key employees; provided, however, that this subsection shall not
restrict or limit the Acquiree in any way from hiring additional personnel who
are required for its operations; or
(g) To the knowledge of Acquiree and Acquiree
Shareholders, any other events or conditions of any character that
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may reasonably be expected to have a materially adverse effect on the Acquiree
or its business or financial condition.
3.A.7 Litigation. To the knowledge of Acquiree and Acquiree
Shareholders, except as set forth in Schedule 3.A.7, there are no actions,
suits, claims, investigations or legal, administrative or arbitration
proceedings pending or threatened against the Acquiree, whether at law or in
equity, or before or by any federal, state, municipal, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality,
nor does the Acquiree or the Acquiree Shareholders know of any basis for any
such action, suit, claim, investigation or proceeding.
3.A.8 Compliance: Governmental Authorizations. The
Acquiree has complied in all material respects with all federal,
state, local or foreign laws, ordinances, regulations and orders
applicable to its business, including without limitation, federal
and state securities, banking collection and consumer protection
laws and regulations that, if not complied with, would materially
and adversely affect its businesses. The Acquiree has all federal,
state, local and foreign governmental licenses and permits
necessary for the conduct of its business. Such licenses and
permits are in full force and effect. Neither the Acquiree nor the
Acquiree Shareholders knows of any violations of any such licenses
or permits. To the knowledge of Acquiree and Messrs. Blaire and
▇▇▇▇▇▇, no proceedings are pending or threatened to revoke or limit
the use of such licenses or permits that would have an adverse
effect on the business of Acquiree.
3.A.9 Due Organization. The Acquiree is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey; it is qualified to do business and in good standing in each state
where its properties are owned, leased or operated, or the business conducted,
by them require such qualification except where failure to so qualify would not
have a material adverse effect on its financial condition, properties, business
or results of operations. The Acquiree has the power to own its properties and
assets and to carry on its business as now presently conducted. True and
complete copies of the Articles of Incorporation and Bylaws of Acquiree,
including any amendments thereto, have been attached as Schedule 3.A.9.
3.A.10 Taxes. Except as disclosed on Schedule 3.A.10, all (a)
federal, state, local or foreign tax returns (collectively, the "Returns")
required to be filed with respect to the properties, assets, operations, income
and net worth of Acquiree have been timely filed or appropriate extensions have
been obtained and such Returns are true, correct and complete; and (b) taxes and
governmental charges, including, without limitation, any interest and penalties
(collectively, "Taxes") due pursuant to such Returns have been paid or adequate
provision therefore has been made on the
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Financial Statements. Except as disclosed on Schedule 3.A.10, there are no
outstanding agreements or waivers extending the statutory period of limitation
concerning any tax liability of Acquiree, no examination of any Return of
Acquiree is currently in progress and no governmental authority has, within the
last three (3) years, notified Acquiree or Acquiree Shareholders of any tax
claim, investigation or proceeding. All monies required to be collected or
withheld by the Acquiree for income taxes, social security and other payroll
taxes related to its occupational or physical therapy personnel have been
collected or withheld, and either paid to the appropriate governmental agencies,
set aside in accounts for such purpose, or accrued, reserved against and entered
upon the books of the Acquiree and the Acquiree is not liable for any taxes or
penalties for failure to comply with any of the foregoing in connection with any
of its occupational or physical therapy personnel. With respect to the
Acquiree's computer programmers, system analysts and consultants (the
"Programmers"), the Acquiree has evaluated and classified the Programmers as
independent contractors or employees in accordance with the National Association
of Computer Consulting Businesses ("NACCB") guidelines and have entered into
independent contractor agreements on forms approved by the NACCB with the
Programmers treated as independent contractors. Acquiree has maintained,
monitored and continues to maintain and monitor the Programmers who are
independent contractors and their agreements to assure compliance with the NACCB
guidelines. To the knowledge of Messrs Blaire and ▇▇▇▇▇▇, the Acquiree is
eligible to receive any funds available under the NACCB legal defense programs
for compliance with its guidelines on independent contractors. The Acquiree is
not and will not be liable for any taxes imposed under Code Sections 1374 or
1375 and has been an S Corporation for federal income tax purposes since May 1,
1987 to the S Revocation Date. Acquiree will be responsible for filing the short
period S return ending on the S Revocation Date and the filing for the one day C
Corporation period, which returns shall be reported on the closing of the books
method as set forth in Code Section 1362(e)(3) and the Acquiree shall comply
with all the necessary requirements for making such election. Set forth on
Schedule 3.A.10 is a list of all elections which have a material effect on the
calculation of Taxes payable or with respect to the income, deductions, credits,
allowances or assets of the Acquiree, except those elections pertaining to the
revocation of the S Corporation status of Acquiree prior to Closing and the
election to change from the cash to accrual method of accounting. The Acquiree
has not made, is not obligated to make, and will not, as a result of the
transactions contemplated hereby, make or become obligated to make any "excess
parachute payment" within the meaning of Section 280G of the Code (determined
without regard to subsection (b)(4) thereof).
3.A.11 Agreements. Schedule 3.A.11 contains a true
and complete list of all material contracts, agreements, mortgages,
obligations, arrangements, restrictions and other instruments to
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which the Acquiree is a party or by which the Acquiree or its assets may be
bound. True and correct copies of all items set forth on Schedule 3.A.11 have
been or will have been made available to RCM prior to the date hereof. No event
has occurred that (whether with or without notice or lapse of time) would
constitute a material default by the Acquiree under any of the contracts or
agreements set forth in Schedule 3.A.11. Neither the Acquiree nor any of the
Acquiree Shareholders have knowledge of any material default by the other
parties to such contracts or agreements.
3.A.12 Title to Property and Related Matters. The Acquiree
has, and at the time of the Closing Date will have, good and marketable title to
all of its properties, interests in properties and assets, real, personal and
mixed, owned by it at the date of this Agreement or acquired by it after the
date of this Agreement, of any kind or character, free and clear of any liens or
encumbrances, except (i) those set forth in Schedule 3.A.12, and (ii) liens for
current taxes not yet delinquent. Schedule 3.A.12 also contains a general
description of all real property in which Acquiree has an ownership interest.
Except as set forth in said Schedule 3.A.12 and except for matters that may
arise in the ordinary course of business, the assets of the Acquiree are in good
operating condition and repair, reasonable wear and tear excepted. There does
not exist any condition that materially interferes with the use thereof in the
ordinary course of the business of the Acquiree.
3.A.13 Licenses; Trademarks: Trade Names. Except as
set forth on Schedule 3.A.13, the Acquiree does not have, nor does
it own or use in its business any licenses, trademarks, trade
names, service marks, copyrights, patents or any applications for
any of the foregoing that relate to its business.
3.A.14 Due Authorization. This Agreement has been duly
authorized, executed and delivered by the Acquiree and constitutes a valid and
binding agreement of the Acquiree, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws relating to, limiting or affecting the
enforcement of creditors rights generally or by the application of equitable
principles. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance with any of
the provisions hereof, will violate in any material respect any order, writ,
injunction or decree of any court or governmental authority, or violate or
conflict with in any material respect or constitute a default under (or give
rise to any right of termination, cancellation or acceleration under), any
provisions of the Acquiree's Articles of Incorporation or Bylaws, the terms or
conditions or provisions of any note, bond, lease, mortgage, obligation,
agreement, arrangement or restriction of any kind to which the Acquiree is a
party or by which the Acquiree or its
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properties may be bound, or violate in any material respect any statute, law,
rule or regulation applicable to the Acquiree, except that the consents
disclosed on Schedule 3.A.14 will be required pursuant to the terms of those
scheduled agreements. No consent or approval by any governmental authority is
required in connection with the execution and delivery by the Acquiree of this
Agreement or the consummation of the transactions contemplated hereby.
3.A.15 Capitalization. The authorized capitalization of the
Acquiree consists of 100,000 shares of $1.00 par value Common Stock of which
10,927 shares are issued and outstanding as of the date of this Agreement; the
Acquiree Shares have been duly authorized, validly issued, and are fully paid
and non-assessable, and were issued in compliance with applicable federal and
state securities laws and regulations. Except as set forth on Schedule 3.A.15,
there are no outstanding or presently authorized securities, warrants,
preemptive rights, subscription rights, options or related commitments or
agreements of any nature to issue any of the Acquiree's securities. Schedule
3.A.15 sets forth the share ownership and respective percentage of the
outstanding shares of Acquiree.
3.A.16 Brokerage Fees. Except for Acquest International, L.P.,
whose fees shall be paid by RCM, the Acquiree has not incurred, and will not
incur, any liability for brokerage or finder's fees or similar charges in
connection with the transactions contained within this Agreement.
3.A.17 Share Ownership. The Acquiree Shares to be surrendered
at the Closing by Messrs. Blaire and ▇▇▇▇▇▇ will be owned of record and
beneficially by Messrs. Blaire and ▇▇▇▇▇▇, free and clear of all liens and
encumbrances of any kind and nature. There are no agreements (other than this
Agreement) to sell, pledge, assign or otherwise transfer such securities.
3.A.18 Messrs. Blaire and ▇▇▇▇▇▇' Obligation. This Agreement
constitutes the valid and legally binding obligation of Messrs. Blaire and
▇▇▇▇▇▇. Except as set forth on Schedule 3.A.18, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will constitute in any material respect a violation of or
default under, or conflict in any material respect with, any judgment, decree,
statute or regulation of any governmental authority applicable to Messrs. Blaire
and ▇▇▇▇▇▇ or any contract, commitment, agreement or restriction of any kind to
which either of Messrs. Blaire and ▇▇▇▇▇▇ are a party or by which either of
Messrs. Blaire and ▇▇▇▇▇▇ are bound.
3.A.19 Approvals Required. Except as set forth on
Schedule 3.A.19 or as contemplated or as required by this
Agreement, no approval, authorization, consent, order or other
action of, or filing with, any person, firm or corporation or any
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court, administrative agency or other governmental authority is required in
connection with the execution and delivery by the Acquiree Shareholders of this
Agreement or the consummation by them of the transactions described herein,
except to the extent that either of Messrs. Blaire and ▇▇▇▇▇▇ may be required to
file reports in accordance with relevant regulations under federal and state
securities laws upon execution of this Agreement and/or consummation of the
transactions contemplated hereby.
3.A.20 Employee; Benefit Plans.
(a) Schedule 3.A.20 sets forth the number and
names of the employees of Acquiree and the total 1995 compensation of each of
the directors, officers and employees of Acquiree.
(b) Acquiree does not have any "employee
benefit plans" (as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")). Schedule 3.A.20
identifies all programs, including, without limitation, any pension plans,
health and welfare plans, life, disability, medical, dental or hospitalization
insurance plans, sick-leave, vacation accrual or holiday plans, bonus, savings,
profit-sharing or other similar benefit plans, deferred compensation, stock
option, stock ownership and stock purchase plans covering employees or former
employees of Acquiree. Except as disclosed on Schedule 3.A.20, each such plan or
program has been operated substantially in accordance with its terms and, to the
extent applicable, ERISA and the Code. Acquiree does not sponsor or contribute
to, nor have they ever sponsored or been required to contribute to, any
"multiemployer plan" as such term is defined in Section 3(37) of ERISA.
(c) Except as disclosed on Schedule 3.A.20,
Acquiree does not have any written contracts, or oral contracts, including any
employment, management, agency or consulting contracts, with respect to any of
its current or retired employees.
(d) Except as disclosed on Schedule 3.A.20,
Acquiree is not a party to any collective bargaining agreement and there are no
union organizational activities or efforts to effect a representation election
pending or threatened.
(e) Except as disclosed on Schedule 3.A.20,
Acquiree has complied in all material respects with all applicable laws relating
to the employment of labor, including the provisions thereof relating to
benefits required to be provided under Part VI of Subtitle B of Title I of ERISA
or Section 4980B(f) of the Code (collectively, "COBRA"), wages, hours, working
additions, employee benefit plans and the payment of withholding and social
security taxes.
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3.A.21 Environmental Matters. Except as set forth in Schedule
3.A.21 Acquiree is in compliance with all laws, rules and regulations relating
to environmental protection and conservation (including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act and the
Superfund Amendments and Reauthorization Act of 1986, as amended and all
applicable state laws pertaining to the environment), and neither Acquiree or
Acquiree Shareholders have received any notification of any asserted present or
past failure to so comply with such laws, rules or regulations. Acquiree has
obtained and is in compliance with all permits, licenses and other
authorizations required under federal, state and local laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
(collectively "Environmental Requirements"). Neither Acquiree or Acquiree
Shareholders is aware of, nor have Acquiree or Acquiree Shareholders received
notice of, any circumstances which may interfere with or prevent continued
compliance, or which may give rise to any liability, or otherwise form the basis
of any claim, or investigation under Environmental Requirements, relating to the
operation of Acquiree's business. For the purpose of this Section, "hazardous
substances" shall include (1) hazardous substances as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, and regulations thereunder and, (2) any substance for which state or
local laws require the clean-up, removal or other special handling of such
materials or imposing liability based upon improper handling thereof.
3.A.22 Insurance. Schedule 3.A.22 contains a list of all
policies of liability, environmental, crime, fidelity, life, fire, workers'
compensation, health, director and officer liability and all other forms of
insurance currently in effect and owned or held by Acquiree, and identifies for
each such policy, to the extent such information is reasonably available to
Acquiree, the underwriter, policy number, coverage type, premium, expiration
date and deductible. All of the insurance policies listed on Schedule 3.A.22 are
outstanding and in full force and effect and all premiums required to be paid
with respect to such policies are currently paid, provided however, Acquiree
shall be permitted to transfer such "key man" insurance obtained for Messrs.
Blaire and ▇▇▇▇▇▇ to the individual policies of Messrs. Blaire and ▇▇▇▇▇▇.
3.A.23 Bank Accounts. Schedule 3.A.23 contains a
list of all bank accounts maintained by, or for the benefit of,
Acquiree.
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3.A.24 Customers. Set forth on Schedule 3.A.24 is a list of
the ten (10) largest customers of Acquiree based on the dollar volume of income
generated by that customer for Fiscal 1995. No such customer has terminated or,
to Acquiree's knowledge, is presently threatening to terminate its relationship
with Acquiree.
3.A.25 Prepayment Penalties. There are no prepayment penalties
or fines associated with the outstanding long-term debt or lines of credit of
Acquiree. If any such prepayment penalties or fines occur, Messrs. Blaire and
▇▇▇▇▇▇ shall be liable for the payment of such penalties or fines.
3.A.26 Approval. The Board of Directors of the Acquiree have
approved the execution of this Agreement and the transactions contemplated
thereby.
3.B. REPRESENTATIONS AND WARRANTIES OF MINORITY SHAREHOLDERS. Each of
the Minority Shareholders as a material inducement to RCM to enter into this
Agreement and consummate the transactions contemplated hereby, make the
following representations and warranties to RCM which representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all material respects on the Closing Date as though made
on and as of such date.
3.B.1 RCM Shares to Constitute Restricted Securities. The
Minority Shareholders represent and warrant: (a) that they have reviewed the
quarterly, annual and periodic reports of RCM, as filed by RCM with the SEC
pursuant to the Exchange Act, and that they have such knowledge and experience
in financial and business matters that they are capable of utilizing the
information set forth therein concerning RCM to evaluate the risks of investing
in the RCM Shares; (b) that they have been advised that the RCM Shares to be
issued to them by RCM constitute "restricted securities" as defined in Rule 144
promulgated under the Securities Act, and accordingly, have not been and will
not be registered under the Securities Act except as otherwise set forth in this
Agreement, and, therefore, they may not be able to sell or otherwise dispose of
such RCM Shares except if the RCM Shares are subject to an effective
registration statement filed with the SEC, in compliance with Rule 144 or
otherwise pursuant to an exemption from registration under the Securities Act;
(c) that the RCM Shares so issued are being acquired by them for their own
benefit and on their own behalf for investment purposes and not with a view to,
or for resale in connection with, a public offering or re-distribution thereof;
(d) that the RCM Shares so issued will not be resold (i) without registration
thereof under the Securities Act (unless in the opinion of counsel acceptable to
RCM, an exemption from such registration is available), (ii) in violation of any
law; and (e) that the certificate or certificates representing the RCM Shares to
be issued will be imprinted with a legend in form and substance as follows:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE
COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION."
and RCM is hereby authorized to notify its transfer agent of the status of the
Shares, and to take such other action including, but not limited to, the placing
of a "Stop Transfer" order on the books and records of RCM's transfer agent to
insure compliance with the foregoing.
3.B.2 Share Ownership. The Acquiree Shares to be surrendered
by the Minority Shareholders at the Closing will be owned of record and
beneficially, by the Minority Shareholders, free and clear of all liens and
encumbrances of any kind and nature. There are no agreements (other than this
Agreement) to sell, pledge, assign or otherwise transfer such securities.
3.B.3 Acquiree Shareholders' Obligation. The Agreements made
by them herein constitute a valid and legally binding obligation on each of the
Minority Shareholders. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will constitute in any
material respect a violation of or default under, or conflict in any material
respect with, any judgment, decree, statute or regulation of any governmental
authority applicable to the Minority Shareholders or any contract, commitment,
agreement or restriction of any kind to which any of the Minority Shareholders
are a party or by which any of the Minority Shareholders are bound.
3.B.4 Approvals Required. Except as contemplated or as
required by this Agreement, no approval, authorization, consent, order or other
action of, or filing with, any person, firm or corporation or any court,
administrative agency or other governmental authority is required in connection
with the execution and delivery by the Minority Shareholders of this Agreement
or the consummation by them of the transactions described herein, except to the
extent that any of the Minority Shareholders may be required to file reports in
accordance with relevant regulations under federal and state securities laws
upon execution of this Agreement and/or consummation of the transactions
contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF RCM. As a material
inducement to the Acquiree and the Acquiree Shareholders to enter
into this Agreement and consummate the transactions contemplated
hereby, RCM does hereby make the following representations and
warranties to the Acquiree and the Acquiree Shareholders, which
representations and warranties are true and correct in all material
15
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respects at this date, and will be true and correct in all material respects on
the Closing Date as though made on and as of such date.
4.1 Due Organization of RCM. RCM is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, is qualified to business and in good standing in each state where the
properties owned, leased or operated, or the business conducted, by it require
such qualification except where failure to so qualify would not have a material
adverse effect on the financial condition, properties, business or results of
operations of RCM. RCM has the corporate power and authority to own its property
and assets and to carry on its business as now presently conducted. True,
correct and complete copies of the Articles of Incorporation and By-Laws of RCM,
including any amendments thereto, are attached hereto as Schedule 4.1.
4.2 SEC Reports. RCM has heretofore delivered to Acquiree and
Acquiree Shareholders copies of its Annual Reports on Form 10-K for the fiscal
years ended October 31, 1995, 1994 and 1993 and all quarterly reports for those
fiscal years (the "RCM Reports"). As of their date of filing, the RCM Reports
did not contain any untrue statements of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading. Furthermore, except as otherwise disclosed in such RCM Reports, RCM
has experienced no material adverse change in its financial condition,
properties, business or prospects since the date thereof. The RCM Reports have
been prepared in compliance with all applicable securities laws, rules and
regulations, and the financial statements included therein had been prepared in
accordance with general accepted accounting principles, consistently applied,
and fairly presented the financial condition of RCM as of the date and for the
periods covered thereby.
4.3 Capitalization. The authorized capital stock of RCM
consists of 40,000,000 shares of common stock, par value $.05 per-share (the
"RCM Common Stock"), of which 17,670,243 shares were outstanding on the date of
this Agreement; all of which have been duly authorized, validly issued, and are
fully paid and nonassessable and were issued in compliance with applicable
federal and state securities laws and regulations. Except as set forth on
Schedule 4.3, there are no outstanding or presently authorized securities,
warrants, preemptive rights, subscription rights, options or related commitments
or agreements of any nature to issue any of the Acquiree's securities or to
sell, pledge, assign or otherwise transfer such securities.
4.4 Undisclosed Liabilities. Except as set forth on
Schedule 4.4, or otherwise disclosed in this Agreement or any
Schedules thereto, RCM does not have any liabilities or obligations
of any nature, fixed or contingent, that will not be shown or
16
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otherwise provided for in the RCM Reports, except for liabilities and
obligations arising subsequent to the date of the RCM Reports in the ordinary
course of business, none of which individually or in the aggregate will be
materially adverse to the business or financial condition of RCM. There are no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 of the Financial Accounting Standards Board) of RCM
that will not be adequately provided for.
4.5 Subsidiaries. Except as set forth on Schedule 4.5, RCM has
no subsidiaries, nor does it own any interest in any other corporation,
partnership or other entity, nor does it have any right or obligation, whether
under any agreement (oral or written) or instrument of any kind, to acquire any
such interest.
4.6 Material Adverse Changes. Except as specifically stated in
Schedule 4.6, since the date of the most recent RCM Report to the date of this
Agreement, the business of RCM has been operated in the ordinary course and
there has not been:
(a) Any materially adverse changes in the business,
condition (financial or otherwise), results of operations, properties, assets,
liabilities, earnings or net worth of RCM for such period or at any time during
such period;
(b) Any material damage, destruction or loss
(whether or not covered by insurance) affecting RCM or its assets,
properties or business;
(c) Any declaration, setting aside or payment of
any dividend or other distribution in respect of any shares of the capital stock
of RCM, or any direct or indirect redemption, purchase or other acquisition of
any such stock or any agreement to do so;
(d) Any cancellation or material breaches on any
existing contract of which RCM is a party that would have a
material adverse effect on the business of RCM;
(e) To the knowledge of RCM, any statute, rule,
regulation or order adopted by any governmental body, agency or authority that
materially and adversely affects RCM or its business or financial condition;
(g) Any agreements to materially increase the rate
or terms of compensation payable or to become payable by RCM to its directors,
officers or key employees; provided, however, that this subsection shall not
restrict or limit RCM in any way from hiring additional personnel who are
required for its operations; or
17
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(h) Any other events or conditions of any character
that may reasonably be expected to have a materially adverse effect on RCM or
its business or financial condition.
4.7 Litigation. To the knowledge of RCM, except as set forth
in Schedule 4.7, there are no actions, suits, claims, investigations or legal,
administrative or arbitration proceedings pending or threatened against RCM,
whether at law or in equity, or before or by any federal, state, municipal,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, nor does RCM know of any basis for any such action,
suit, claim, investigation or proceeding.
4.8 Compliance: Governmental Authorizations. To the
best of its knowledge, RCM has complied in all material respects
with all federal, state, local or foreign laws, ordinances,
regulations and orders applicable to its business, including
without limitation, federal and state securities, banking
collection and consumer protection laws and regulations that, if
not complied with, would materially and adversely affect its
businesses. RCM has all federal, state, local and foreign
governmental licenses and permits necessary for the conduct of its
business. Such licenses and permits are in full force and effect.
RCM does not know of any violations of any such licenses or
permits. To the knowledge of RCM, no proceedings are pending or
threatened to revoke or limit the use of such licenses or permits
that would have an adverse effect on the business of RCM.
4.9 Taxes. Except as disclosed on Schedule 4.9, all (a)
federal, state, local or foreign tax returns (collectively, the "RCM Returns")
required to be filed with respect to the properties, assets, operations, income
and net worth of RCM have been timely filed or appropriate extensions have been
obtained and such RCM Returns are true, correct and complete; (b) taxes and
governmental charges, including, without limitation, any interest and penalties
(collectively, "RCM Taxes") due pursuant to such RCM Returns have been paid or
adequate provision therefore has been made on the RCM Report; and (c) federal,
state, local and foreign withholdings required with respect to the business of
RCM have been withheld and timely paid over to the appropriate governmental
authority. No RCM Returns have been audited or, to the knowledge of RCM, are
currently being audited by the Internal Revenue Service. Except as disclosed on
Schedule 4.9, there are no outstanding agreements or waivers extending the
statutory period of limitation concerning any tax liability of RCM, no
examination of any RCM Returns currently in progress and no governmental
authority has, within the last three (3) years, notified RCM of any tax claim,
investigation or proceeding.
4.10 Title to Property and Related Matters. RCM has, and
at the time of the Closing Date will have, good and marketable
title to all of its properties, interests in properties and assets,
18
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real, personal and mixed, owned by it at the date of this Agreement or acquired
by it after the date of this Agreement, of any kind or character, free and clear
of any liens or encumbrances, except (i) those set forth in Schedule 4.10, and
(ii) liens for current taxes not yet delinquent. Schedule 4.10 also contains a
general description of all real property in which RCM has an ownership interest.
Except as set forth in said Schedule 4.10 and except for matters that may arise
in the ordinary course of business, the assets of RCM are in good operating
condition and repair, reasonable wear and tear excepted. There does not exist
any condition that materially interferes with the use thereof in the ordinary
course of the business of RCM.
4.11 Licenses; Trademarks: Trade Names. Except as set
forth on Schedule 4.11, RCM does not have, nor does it own or use
in its business any licenses, trademarks, trade names, service
marks, copyrights, patents or any applications for any of the
foregoing that relate to its business.
4.12 Employee; Benefit Plans.
(a) Schedule 4.12 sets forth the number and names
of the employees of RCM and the total 1995 compensation of each of the
directors, officers and employees of RCM.
(b) Schedule 4.12 identifies all "employee benefit
plans" (as such term is defined in Section 3(3) of ERISA and programs,
including, without limitation, any pension plans, health and welfare plans,
life, disability, medical, dental or hospitalization insurance plans,
sick-leave, vacation accrual or holiday plans, bonus, savings, profit-sharing or
other similar benefit plans, deferred compensation, stock option, stock
ownership and stock purchase plans covering employees or former employees of
RCM. Except as disclosed on Schedule 4.12, each such plan or program has been
operated substantially in accordance with its terms and, to the extent
applicable, ERISA and the Code. RCM does not sponsor or contribute to, nor have
they ever sponsored or been required to contribute to, any "multiemployer plan"
as such term is defined in Section 3(37) of ERISA.
(c) Except as disclosed on Schedule 4.12, RCM does
not have any written contracts, or oral contracts, including any employment,
management, agency or consulting contracts, with respect to any of its current
or retired employees.
(d) Except as disclosed on Schedule 4.12, RCM is
not a party to any collective bargaining agreement and there are no union
organizational activities or efforts to effect a representation election pending
or threatened.
(e) Except as disclosed on Schedule 4.12, RCM has
complied in all material respects with all applicable laws relating
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to the employment of labor, including the provisions thereof relating to
benefits required to be provided under Part VI of Subtitle B of Title I of ERISA
or Section 4980B(f) of the Code (collectively, "COBRA"), wages, hours, working
additions, employee benefit plans and the payment of withholding and social
security taxes.
4.13 Environmental Matters. Except as set forth in Schedule
4.13, RCM is in compliance with all laws, rules and regulations relating to
environmental protection and conservation (including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act and the
Superfund Amendments and Reauthorization Act of 1986, as amended and all
applicable state laws pertaining to the environment), and RCM has not received
any notification of any asserted present or past failure to so comply with such
laws, rules or regulations. RCM has obtained and is in compliance with all
permits, licenses and other authorizations required under federal, state and
local laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes (collectively "Environmental Requirements"). RCM is not
aware of, nor has received notice of, any circumstances which may interfere with
or prevent continued compliance, or which may give rise to any liability, or
otherwise form the basis of any claim, or investigation under Environmental
Requirements, relating to the operation of RCM's business. For the purpose of
this Section, "hazardous substances" shall include (1) hazardous substances as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, and regulations thereunder and, (2) any substance for which
state or local laws require the clean-up, removal or other special handling of
such materials or imposing liability based upon improper handling thereof.
4.14 Insurance. Schedule 4.14 contains a list of all policies
of liability, environmental, crime, fidelity, life, fire, workers' compensation,
health, director and officer liability and all other forms of insurance
currently in effect and owned or held by RCM, and identifies for each such
policy, to the extent such information is reasonably available to RCM, the
underwriter, policy number, coverage type, premium, expiration date and
deductible. All of the insurance policies listed on Schedule 4.15 are
outstanding and in full force and effect and all premiums required to be paid
with respect to such policies are currently paid and are adequate in light of
the business of RCM.
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4.15 Bank Accounts. Schedule 4.15 contains a list of
all bank accounts maintained by, or for the benefit of, RCM.
4.16 Customers. Set forth on Schedule 4.16 is a list of the
ten (10) largest customers of RCM based on the dollar volume of income generated
by that customer for the fiscal year ended September 30, 1995. No such customer
has terminated or to RCM's knowledge is presently threatening to terminate its
relationship with RCM.
4.17 Due Authorization. This Agreement has been duly
authorized, executed, and delivered by RCM, and constitutes a legal, valid, and
binding obligation of RCM, enforceable in accordance with its terms except as
such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws relating to, limiting or affecting the
enforcement of creditors rights generally or by the application of equitable
principles. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance with any of
the provisions hereof, will violate in any material respect any order, writ,
injunction or decree of any court or governmental authority, or violate or
conflict with in any material respect or constitute a default under (or give
rise to any right of termination, cancellation or acceleration under), any
provisions of RCM's Articles of Incorporation or Bylaws, the terms or conditions
or provisions of any note, bond, lease, mortgage, obligation, agreement,
arrangement or restriction of any kind to which the Acquiree is a party or by
which RCM or its properties may be bound, or violate in any material respect any
statute, law, rule or regulation applicable to RCM, except that the consents
disclosed on Schedule 4.17 will be required pursuant to the terms of those
scheduled agreements. No consent or approval by any governmental authority is
required in connection with the execution and delivery by RCM of this Agreement
or the consummation of the transactions contemplated hereby.
4.18 RCM Shares. The RCM Shares to be delivered to the
Acquiree Shareholders at Closing will be validly and legally issued, free and
clear of all liens, encumbrances, transfer fees and preemptive rights, and will
be fully paid and non-assessable. The RCM Shares will, however, constitute
"restricted securities" as defined in Rule 144 promulgated under the Securities
Act.
4.19 Brokerage Fees. Except for Acquest International, L.P.,
whose fees shall be paid by RCM, RCM has not incurred, and will not incur, any
liability for brokerage or finder's fees or similar charges in connection with
the transactions contained within this Agreement.
4.20 Accounts Receivable. The Financial Statements
contained within the RCM Reports reflect the accounts receivable of
RCM for the periods therein indicated. All of the accounts
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receivable of RCM now and on the Closing Date, are bona fide accounts receivable
of RCM representing the sales price of (or other sums or fees receivable for or
in respect of) goods, merchandise, or services sold or performed by RCM in valid
transactions in the regular course of its business to or for the benefit of its
customers. Such accounts receivable, subject to reserves, if any, established
within the RCM Reports are not uncollectible or subject to offset or
counterclaim or otherwise in controversy.
4.21 Agreements. Schedule 4.21 contains a true and complete
list of all material contracts, agreements, mortgages, obligations,
arrangements, restrictions and other instruments to which RCM is a party or by
which RCM or its assets is currently bound. True and correct copies of all items
set forth on Schedule 4.21 have been or will have been made available to
Acquiree and Messrs. Blaire and ▇▇▇▇▇▇ prior to the date hereof. No event has
occurred that (whether with or without notice or lapse of time) would constitute
a material default by RCM under any of the contracts or agreements set forth in
Schedule 4.21. RCM does not have any knowledge of any material default by the
other parties to such contracts or agreements.
4.22 Approval. The Board of Directors of RCM have
approved the execution of this Agreement and the transactions
contemplated thereby.
4.23 No Approvals Required. No approval, authorization,
consent, order or other action of, or filing with, any person, firm or
corporation or any court, administrative agency or other governmental authority
is required in connection with the execution and delivery by RCM of this
Agreement or the consummation by it of the transactions described herein, except
to the extent that the parties may be required to file reports in accordance
with relevant regulations under federal and state securities laws.
5. COVENANTS OF THE PARTIES.
5.1 Disclosure Documents.
(a) RCM shall supply to Acquiree the necessary
information in writing, or cause the necessary information to be supplied in
writing, relating to RCM for inclusion in any document(s) to be delivered to
Acquiree Shareholders in connection with seeking their approval of the
transactions contemplated by this Agreement.
(b) Acquiree shall supply to RCM the necessary
information in writing, or cause the necessary information to be supplied in
writing, relating to Acquiree for inclusion in any documents or reports to be
filed with the SEC or any regulatory
22
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agency in connection with the transactions contemplated by this
Agreement.
5.2 Access to Information. At all times prior to the Closing
Date or the earlier termination of this Agreement in accordance with the
provisions of Section 11, each of the parties hereto shall provide to the other
parties (and the other parties' authorized representatives) full access during
normal business hours to the premises, properties, books, records, assets,
liabilities, operations, contracts, personnel, financial information and other
data and information of or relating to such party (including without limitation
all written proprietary and trade secret information and documents, and other
written information and documents relating to intellectual property rights and
matters), and will cooperate with the other party in conducting its due
diligence investigation of such party.
5.3 Confidentiality.
(a) Confidentiality of RCM-Related Information.
With respect to information concerning RCM that is made available to Acquiree or
Acquiree Shareholders pursuant to the provisions of Section 5.2, Acquiree and
Acquiree Shareholders agree that they shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the transactions contemplated by this Agreement and shall not
disseminate or disclose any of such information other than to representatives
who need to know such information for the sole purpose of evaluating the
transactions to be undertaken pursuant to this Agreement (each of whom shall be
informed in writing by Acquiree of the confidential nature of such information
and directed by Acquiree to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Section 11, Acquiree and
Acquiree Shareholders shall immediately return all such information, all copies
thereof and all information prepared by Acquiree based upon the same, upon RCM's
request; provided, however, that one copy of all such material may be retained
by Acquiree's outside legal counsel for purposes only of resolving any disputes
under this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that; (i) is learned by Acquiree or Acquiree
Shareholders from a third party entitled to disclose it; (ii) become known
publicly other than through Acquiree or Acquiree Shareholders or any party who
received the same through Acquiree or Acquiree Shareholders; (iii) is required
by law or court order to be disclosed by Acquiree or Acquiree Shareholders
(after notice and opportunity to oppose such disclosure); or (iv) is disclosed
with the express prior written consent thereto of RCM. Acquiree or Acquiree
Shareholders shall undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this subparagraph (a);
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(b) Confidentiality of Acquiree-Related
Information. With respect to information concerning Acquiree that is made
available to RCM pursuant to the provisions of Section 5.2, RCM agrees that it
shall hold such information in strict confidence, shall not use such information
except for the sole purpose of evaluating the transactions to be undertaken
pursuant to this Agreement and shall not disseminate or disclose any of such
information other than to their directors, officers, employees, shareholders,
affiliates, agents and representatives who need to know such information for the
sole purpose of evaluating the transactions to be undertaken pursuant to this
Agreement (each of whom shall be informed in writing by RCM of the confidential
nature of such information and directed by such party to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Section 11, RCM agrees to return immediately all such information, all copies
thereof and all information prepared by it based upon the same, upon Acquiree's
request; provided, however, that one copy of all such material may be retained
by RCM's outside legal counsel for purposes only of resolving any disputes under
this Agreement. The above limitations on use, dissemination and disclosure shall
not apply to information that: (i) is learned by RCM from a third party entitled
to disclose it; (ii) becomes known publicly other than through RCM or any party
who received the same through either of them; (iii) is required by law or court
order to be disclosed by RCM (after notice and opportunity to oppose such
disclosure); or (iv) is disclosed with the express prior written consent thereto
of Acquiree. RCM agrees to undertake all necessary steps to ensure that the
secrecy and confidentiality of such information will be maintained in accordance
with the provisions of this subparagraph (b).
5.4 Nondisclosure. Neither RCM, Acquiree or
Acquiree Shareholders shall disclose to the public or to any third party the
existence of this Agreement or the transactions contemplated hereby or any other
material non-public information concerning or relating to the other party
hereto, other than with the express prior written consent of the other party
hereto, except as may be required by applicable securities laws as they pertain
to public companies, law or court order or to enforce the rights of such
disclosing party under this Agreement, in which event the contents of any
proposed disclosure shall be discussed with the other party before release;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this Agreement to any of its
directors, officers, employees, shareholders, affiliates, agents and
representative who need to know such information for the sole purpose of
evaluating the transactions contemplated by this Agreement, to any party whose
consent is required in connection with this Agreement; or to any regulatory body
where such disclosure is required under federal or state law.
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5.5 Consents. RCM and Acquiree shall cooperate and use their
best efforts to obtain, prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts as are necessary for the consummation of
the transactions contemplated by this Agreement.
5.6 Filings. RCM and Acquiree shall, as promptly as
practicable, make any required filings, and RCM and Acquiree shall promptly make
any other required submissions, under any law, statute, order rule or regulation
with respect to the transactions contemplated by this Agreement and the related
transactions and shall cooperate with each other with respect to the foregoing.
5.7 All Reasonable Efforts. Subject to the terms and
conditions of this Agreement and to the fiduciary duties and obligations of the
board of directors of Acquiree and RCM, each of the parties to this Agreement
shall use all reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any injunctions or other
impediments or delays, legal or otherwise, as soon as reasonable practicable, to
consummate the transactions contemplated by this Agreement.
5.8 Notification of Certain Matters. Except with respect to
the actions contemplated by this Agreement, Acquiree shall give prompt notice to
RCM, and RCM shall give prompt notice to Acquiree, of (a) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which would
cause any of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (b) any
material failure of Acquiree, on the one hand, or RCM, on the other hand, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however, the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available to the party receiving such notice under this
Agreement.
5.9 Expenses. Each party shall bear its own expenses in
connection with the transactions contemplated by this Agreement; provided,
however, that the (i) expenses of Acquiree and Acquiree Shareholders incurred in
connection therewith shall not exceed $75,000 in the aggregate including legal,
accounting (including costs related to the preparation and filing of the
year-end and final tax returns and review and preparation of the Interim
Financial Statements and Closing Financial Statements, however, excluding any
costs relating the preparation of the 1995 Financial Statements) and other costs
incurred by Acquiree and Acquiree Shareholders in connection with this
Acquisition and (ii) Acquiree shall pay the expenses of Acquiree Shareholders
related to this
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acquisition. To the extent that Acquiree's expenses exceed $75,000, the Acquiree
Shareholders shall reimburse Acquiree for such excess amount, if any, within 65
days after the Closing Date.
5.10 Consent of Auditors. Acquiree Shareholders shall, when
necessary, obtain the necessary consents of all auditors who have provided audit
reports in connection with any of the Financial Statements which may be required
by RCM for the preparation and filing of documents and reports with the SEC.
5.11 Discharge of Bonuses. Any and all accrued bonuses or
other compensation over and above historic compensation levels which may be due
and owing to the Acquiree Shareholders shall be discharged and Acquiree released
from such obligations on or before the Closing Date.
5.12 Loss of "S" Corporation Status. Upon completion of the
transactions as contemplated by this Agreement, Acquiree Shareholders shall be
responsible for the payment and filing of any final tax returns or other
obligations incurred in connection with the termination of Acquiree's "S"
Corporation status.
5.13 Documents at Closing. Each party to this Agreement agrees
to execute and deliver on the Closing Date those documents identified in Section
6.2.
5.14 Interim Operations of RCM and Acquiree. Except as
contemplated by this Agreement, including any Exhibits and Schedules hereto, or
to the extent that the parties shall otherwise consent in writing or as
otherwise identified in Schedules 3.A.6 and 4.6, during the period from the date
of this Agreement and continuing until the Closing Date, each of RCM and
Acquiree shall carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent with such business, use all reasonable efforts to preserve
intact their present organization of such business, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it and they shall
not take any action, or fail to take any action, that is reasonably likely to
result in any of their respective representations and warranties set forth in
this Agreement becoming untrue as though such representations and warranties are
made as of and on the Closing Date.
5.15 Tax and Accounting Treatment of Acquiree. Prior to
Closing, Acquiree shall take any and all actions necessary to revoke its
election to be treated as an S-Corporation pursuant to the Code and to change
from the cash method of accounting to the accrual method of accounting.
26
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5.16 Prohibition on Trading in RCM Stock. The Acquiree and
Acquiree Shareholders acknowledge that the United States Securities Laws
prohibit any person who has received material non-public information concerning
the matters which are the subject matter of this Agreement from purchasing or
selling the securities of RCM, or from communicating such information to any
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities of RCM. Accordingly, the
Acquiree Shareholders agree that they will not purchase or sell any securities
of RCM, or communicate such material non-public information to any other person
under circumstances in which it is reasonably foreseeable that such person is
likely to purchase or sell securities of RCM, until no earlier than 72 hours
following the dissemination of a Current Report on Form 8-K to the SEC
announcing the Closing pursuant to this Agreement.
6. THE CLOSING.
6.1 The Closing. The closing ("Closing") of the purchase and
sale and other transactions contemplated by this Agreement shall take place (a)
at the offices of Clark, Ladner, ▇▇▇▇▇▇▇▇▇▇▇ & Young, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, 10:00 a.m, local time on March 11, 1996, or (b)
at such other time and place and on such other date as RCM and Acquiree or
Acquiree Shareholders shall agree. The date of the Closing is referred to herein
as the "Closing Date."
6.2 Transactions at Closing. On the Closing Date, the
following transactions shall occur, all of such transactions being
deemed to occur simultaneously:
(a) the Acquiree and Acquiree Shareholders will
deliver, or cause to be delivered, to RCM the following:
(i) stock certificates representing the
Acquiree Shares being surrendered hereunder, duly endorsed with stock powers
attached in blank;
(ii) all corporate records of the Acquiree,
including without limitation corporate minute books (which shall contain copies
of the Articles of Incorporation and Bylaws, as amended to the Closing Date),
stock books, stock transfer books, corporate seals; and such other corporate
books and records as may reasonably be requested by RCM and its counsel;
(iii) a certificate executed by the Acquiree and the Acquiree
Shareholders to the effect that all representations and warranties made by the
Acquiree and Acquiree Shareholders under this Agreement are true and correct as
of the Closing Date, as though originally given to RCM on said date;
27
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(iv) a certificate of good standing for the Acquiree from the
Secretary of the State of New Jersey, dated at or about the Closing Date, to the
effect that such corporation is in good standing under the laws of such state;
(v) an incumbency certificate for the Acquiree
signed by all of the officers thereof dated at or about the Closing
Date;
(vi) certified Articles of Incorporation of the Acquiree dated
at or about the Closing Date and a copy of the Bylaws of the Acquiree certified
by the Secretary of the Acquiree dated at or about the Closing Date;
(vii) certified resolutions from the Secretary of the Acquiree
dated at or about the Closing Date authorizing the transactions contemplated
under this Agreement;
(viii) the Registration Rights Agreement
described in Exhibit "B" signed by each of the Acquiree
Shareholders;
(ix) the Escrow Agreement described in Exhibit
"A" signed by the Acquiree Shareholders and the Escrow Agent;
(x) an Employment Agreement described in
Exhibit "D" signed by ▇▇▇▇▇▇ ▇▇▇▇▇▇ and RCM;
(xi) an Employment Agreement described in
Exhibit "E" signed by ▇▇▇▇▇ ▇▇▇▇▇▇ and RCM;
(xii) an Investor Representation Letter
described in Exhibit "F" signed by each of the Acquiree
Shareholders;
(xiii) a Standstill and Shareholders' Agreement
described in Exhibit "C" signed by each of the Acquiree
Shareholders and RCM;
(xiv) resignations of all officers and
directors of Acquiree, following which ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ shall be
elected by RCM as the sole directors of Acquiree;
(xv) any documentation associated with the
transactions contemplated by Section 5.15 of this Agreement;
(xvi) such documents as may be needed to
accomplish the Closing under the corporate laws of the states of
incorporation of RCM and Acquiree;
(xvii) such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to
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\PHILA2\100322_5
the provisions of this Agreement or that may be reasonably
requested in furtherance of the provisions of this Agreement;
(xviii) an opinion of counsel in form and
substance satisfactory to RCM.
(b) RCM will deliver or cause to be delivered to
the Acquiree and the Acquiree Shareholders:
(i) a certificate or certificates of RCM
Common Stock which represent the Delivered Shares. The certificate or
certificates of RCM Common Stock which represent the RCM Shares shall bear the
following legend.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM
REGISTRATION, UNDER THE SECURITIES ACT OF 1933, BASED ON AN
OPINION LETTER OF COUNSEL FOR THE CORPORATION OR A NON-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PROVISIONS IN
OF AN AGREEMENT DATED AS OF MARCH 1, 1996
BETWEEN RCM TECHNOLOGIES, INC. AND THE PERSONS
IDENTIFIED IN SUCH AGREEMENT AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SAID AGREEMENT IS ON
FILE AT THE OFFICES OF THE CORPORATE SECRETARY
OF RCM TECHNOLOGIES, INC."
(ii) a certificate of RCM's President to effect
that all representations and warranties of RCM under this Agreement are
reaffirmed on the Closing Date, as though originally given to the Acquiree and
the Acquiree Shareholders on said date;
(iii) certificate from the Secretary of State of Nevada dated
at or about the Closing Date that RCM is in good standing under the laws of said
state;
(iv) certified resolution of the Secretary of RCM dated at or
about the Closing Date authorizing the transactions contemplated under this
Agreement;
(v) an opinion of counsel in form and substance
satisfactory to the Acquiree and the Acquiree Shareholders;
(vi) the Registration Rights Agreement
described in Exhibit "B" signed by each of the Acquiree
Shareholders;
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(vii) the Escrow Agreement described in Exhibit
"A" signed by the Acquiree Shareholders and the Escrow Agent;
(viii) an Employment Agreement described in
Exhibit "D" signed by ▇▇▇▇▇▇ ▇▇▇▇▇▇ and RCM;
(ix) an Employment Agreement described in
Exhibit "E" signed by ▇▇▇▇▇ ▇▇▇▇▇▇ and RCM;
(x) a Standstill and Shareholders' Agreement
described in Exhibit "C" signed by each of the Acquiree
Shareholders and RCM;
(xi) such documents as may be needed to
accomplish the Closing under the corporate laws of the state of
incorporation of RCM and Acquiree;
(xii) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement, or that may be reasonably requested in furtherance of the provisions
of this Agreement.
(c) Blaire and ▇▇▇▇▇▇ shall deliver the Escrow
Shares into escrow pursuant to the terms of the Escrow Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND ACQUIREE
SHAREHOLDERS. All obligations of the Acquiree and the Acquiree Shareholders
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date (unless otherwise stated herein), of each of the following conditions, any
one or all of which may be waived by the Acquiree or the Acquiree Shareholders:
7.1 The transactions identified within this Agreement shall
constitute a tax-free reorganization pursuant to Section 368 of the Code.
7.2 The Board of Directors of RCM shall have approved the
execution of this Agreement and the transactions contemplated thereby.
7.3 The representations and warranties made by or on behalf of
RCM contained in this Agreement or in any certificate or document delivered to
the Acquiree or the Acquiree Shareholders pursuant to the provisions hereof at
the Closing Date shall be true in all respects at and as of the time of the
Closing Date as though such representations and warranties were made at and as
of such time.
7.4 RCM shall have performed and complied in all
material respects with all covenants, agreements and conditions
30
\PHILA2\100322_5
required by this Agreement to be performed or complied with by it
prior to or at the Closing.
7.5 RCM shall have delivered all of the Schedules required
herein, and copies of the documents referred to therein, to the Acquiree and
such Schedules and documents shall have been reasonably acceptable to Acquiree
and Acquiree Shareholders.
7.6 There shall be delivered to the Acquiree and the Acquiree
Shareholders an officer's certificate of RCM to the effect that all of the
representations and warranties of RCM set forth herein are true and complete in
all material respects as of the Closing Date, and that RCM has complied in all
material respects with its covenants and agreements set forth herein that are
required to be complied with by the Closing Date.
7.7 No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Closing and the other
transactions contemplated by this Agreement.
7.8 RCM shall have obtained the approval of its
principal lender of this Agreement and the transactions
contemplated thereby.
7.9 The indebtedness owed by the Acquiree and Acquiree
Shareholders to United Jersey Bank, excluding any prepayment penalties, as of
the Closing shall have been discharged in full; the Acquiree and the Acquiree
Shareholders and their spouses shall be removed from any guarantees with respect
to such indebtedness; and evidence of such discharges shall be produced at
Closing.
7.10 RCM shall have executed an Employment Agreement with each
of Messrs. Blaire and ▇▇▇▇▇▇ substantially in form and substance similar to that
attached hereto as Exhibits "D" and "E", respectively.
7.11 RCM and Acquiree Shareholders shall have executed a
Standstill and Shareholders' Agreement substantially in form and substance
similar to that attached hereto as Exhibit "C".
7.12 RCM and Acquiree Shareholders shall have executed a
Registration Rights Agreement substantially in form and substance similar to
that attached hereto as Exhibit "B".
7.13 RCM and Acquiree Shareholders shall have executed an
Escrow Agreement substantially in form and substance similar to that attached
hereto as Exhibit "A".
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7.14 Acquiree Shareholders shall have completed prior to the
Closing Date, to their satisfaction, a due diligence review of the financial
condition, results of operations, properties, assets, liabilities, business or
prospects of RCM.
7.15 All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required of RCM under this Agreement, applicable law or any
applicable contract or agreement (all as contemplated by this Agreement) to
complete the Closing shall have been secured.
7.16 ▇▇▇▇ ▇▇▇▇▇ shall have agreed to remain employed by RCM as
an executive officer of RCM for a period of at least two (2) years following the
Closing.
7.17 There shall have occurred no material adverse change to
the business, operations, assets, management, regulatory environment and
business prospects of RCM.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM. All
obligations of RCM under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the
following conditions, any one or all of which may be waived in
writing by RCM:
8.1 The Board of Directors of the Acquiree have approved the
execution of this Agreement and the transactions contemplated thereby.
8.2 The representations and warranties made by the Acquiree
and the Acquiree Shareholders contained in this Agreement or in any certificate
or document delivered to RCM at the Closing pursuant to the provisions hereof
shall be true in all respects at and as of the time of the Closing as though
such representations and warranties were made at and as of such time.
8.3 The Acquiree and the Acquiree Shareholders shall have
performed and complied in all material respects with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with by
them prior to or at the Closing.
8.4 The Acquiree shall have delivered all of the Schedules
required herein, and copies of the documents referred to therein, to RCM and
such Schedules and documents shall have been reasonably acceptable to RCM.
8.5 There shall be delivered to RCM an officer's certificate
of the Acquiree to the effect that all of the representations and warranties of
the Acquiree set forth herein are true and complete in all material respects as
of the Closing Date,
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\PHILA2\100322_5
and that the Acquiree has complied in all material respects with its covenants
and agreements set forth herein that are required to be complied with by the
Closing Date; and there shall be delivered to RCM certificates signed by Messrs.
Blaire and ▇▇▇▇▇▇ and the Minority Shareholders to the effect that the
representations and warranties of Messrs. Blaire and ▇▇▇▇▇▇ and the Minority
Shareholders made within this Agreement are true and correct in all material
respects.
8.6 RCM shall have completed prior to the Closing Date, to its
satisfaction, a due diligence review of the financial condition, results of
operations, properties, assets, liabilities, business or prospects of the
Acquiree.
8.7 RCM shall have obtained the approval of its principal
lender of this Agreement and the transactions contemplated thereby.
8.8 Acquiree shall not have any "built-in gains" from the
termination of its "S"-Corporation status.
8.9 All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required of Acquiree or Acquiree Shareholders under this
Agreement, applicable law or any applicable contract or agreement (all as
contemplated by this Agreement) to complete the Closing shall have been secured.
8.10 No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Closing and the other
transactions contemplated by this Agreement.
8.11 Acquiree Shareholders shall have executed a Registration
Rights Agreement substantially in form and substance similar to that attached
hereto as Exhibit "B".
8.12 Acquiree Shareholders shall have executed an Escrow
Agreement substantially in form and substance similar to that attached hereto as
Exhibit "A".
8.13 Messrs. Blaire and ▇▇▇▇▇▇ shall each have executed an
Employment Agreement substantially in form and substance similar to that
attached hereto as Exhibits "D" and "E", respectively.
8.14 Acquiree Shareholders shall have executed an Investor
Representation Letter substantially in form and substance similar to that
attached hereto as Exhibit "F".
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\PHILA2\100322_5
8.15 Acquiree Shareholders shall have executed a Standstill
and Shareholders' Agreement substantially in form and substance similar to that
attached hereto as Exhibit "C".
8.16 Acquiree and Acquiree Shareholders shall take all actions
necessary to effect the resignation of all of the current directors and officers
of Acquiree in the manner identified in Section 6.2(a)(xiv).
8.17 Except as contemplated or as required by this Agreement,
there shall have occurred no material adverse change to the business,
operations, assets, management, regulatory environment and business prospects of
Acquiree.
8.18 Financial Statements.
(a) The 1995 Financial Statements of Acquiree shall
reflect (i) gross revenues of at least $26 million; (ii) gross margin of no less
than $6 million; (iii) "recast net income" of not less than $807,500; (iv)
stockholders equity (defined as total assets less total liabilities) of at least
$1,640,000; and (v) working capital (defined as total current assets less total
current liabilities) of not less than $1,410,000.
(b) For the purposes of subparagraph 8.18(a) above,
the term "recast net income" shall be the net income of the Acquiree reflected
on its 1995 Financial Statements (which amount shall be no less than $40,215),
plus certain additions thereto of $767,285 for officer bonuses, fringe benefits,
stock repurchase and discontinued operations.
(c) The Acquiree shall have provided the Interim
Financial Statements to RCM which reflect: (i) shareholders equity and working
capital on the last day of the period covered by the Interim Financial
Statements is no less than those required at subparagraphs 8.18(a)(iv) and
(a)(v) above; and (ii) gross revenues, gross profits and recast net income
(inclusive, for the purposes of the Interim Financial Statements, of expenses
associated with this transaction identified in Section 5.9) through the period
reflected therein in amounts that are in proportion to those required in
subparagraphs 8.18(a)(i), (ii) and (iii) above to be reflected during Fiscal
1995, taking into account seasonality, expenses of this transaction and weather
related business interruptions.
For the purpose of subparagraphs 8.18(a) and 8.18(c)
above, unless otherwise defined herein, the terms utilized therein shall have
the respective meanings accorded to them under generally accepted accounting
principles applied in a manner consistent with the most recent Financial
Statements of Acquiree.
9. INDEMNIFICATION.
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9.1 Messrs Blaire and ▇▇▇▇▇▇. Messrs. Blaire and ▇▇▇▇▇▇
jointly and severally shall indemnify, defend and hold harmless, for such period
of time as set forth in Section 13.3, RCM from and against any and all demands,
claims, actions or causes of action, judgments, assessments, losses,
liabilities, damages or penalties and reasonable attorneys' fees and related
disbursements (collectively, "Claims") where such Claim or Claims, in the
aggregate exceed $50,000, and in such case for the entire amount of such Claim
or Claims in the aggregate, incurred by RCM which arise out of or result from a
misrepresentation, breach of warranty, or breach of any covenant of Acquiree or
Acquiree Shareholders contained herein or in the Schedules annexed hereto or in
any other documents or instruments furnished by the Acquiree or Acquiree
Shareholders pursuant hereto or in connection with the transactions contemplated
hereby or thereby. Notwithstanding the preceding sentence, the liability of
Messrs. Blaire and ▇▇▇▇▇▇ arising from this Agreement or the transactions
related thereto shall be limited to the Escrow Shares in accordance with the
terms of the Escrow Agreement, except, however, where there is evidence of bad
faith, fraud or wanton misconduct, the liability of Messrs. Blaire and ▇▇▇▇▇▇
arising form this Agreement or the transactions related thereto shall be
unlimited and Messrs. Blaire and ▇▇▇▇▇▇ shall be liable for the entire amount of
such Claim. In addition, in the event that a Claim is based on Section 3.A.10,
then RCM shall assume the defense of such Claim on behalf of Messrs. Blaire and
▇▇▇▇▇▇ at no cost to Messrs. Blaire and ▇▇▇▇▇▇, however, Messrs. Blaire and
▇▇▇▇▇▇ shall be liable for any monetary damages which may result from a Claim
based on Section 3.A.10, provided further, that Messrs. Blaire and ▇▇▇▇▇▇'
liability for such monetary damages shall be limited to the Escrow Shares.
9.2 RCM. RCM shall indemnify, defend and hold harmless
Acquiree and Acquiree Shareholders from and against any and all Claims incurred
by the Acquiree and/or any Acquiree Shareholder which arise out of or result
from a misrepresentation, breach of warranty or breach of any covenant of RCM
contained herein or in any ancillary certificates or other documents or
instruments furnished by RCM pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
9.3 Methods of Asserting Claims for Indemnification.
All claims for indemnification under this Agreement shall be
asserted as follows:
(a) Third Party Claims. In the event that any
Claim for which a party (the "Indemnitee") would be entitled to indemnification
under this Agreement is asserted against or sought to be collected from the
Indemnitee by a third party the Indemnitee shall promptly notify the other party
(the "Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim
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Notice"). The Indemnitor shall have 30 days (or, if shorter, a period to a date
not less than 10 days prior to when a responsive pleading or other document is
required to be filed but in no event less than 10 days from delivery or mailing
of the Claim Notice) (the "Notice Period") to notify the Indemnitee (i) whether
or not it disputes the Claim and (ii) if liability hereunder is not disputed,
whether or not it desires to defend the Indemnitee. If the Indemnitor elects to
defend by appropriate proceedings, such proceedings shall be promptly settled or
prosecuted to a final conclusion in such a manner as to avoid any risk of damage
to the Indemnitee; and all costs and expenses of such proceedings and the amount
of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control,
any such defense or settlement, it may do so at its sole cost and expense. If
the Indemnitor has disputed the Claim, as provided above, and shall not defend
such Claim, the Indemnitee shall have the right to control the defense or
settlement of such Claim, in its sole discretion, and shall be reimbursed by the
Indemnitor for its reasonable costs and expenses of such defense if it shall
thereafter be found that such Claim was subject to indemnification by the
Indemnitor hereunder.
(b) Non-Third Party Claims. In the event that the
Indemnitee should have a Claim for indemnification hereunder which does not
involve a Claim being asserted against it or sought to be collected by a third
party, the Indemnitee shall promptly send a Claim Notice with respect to such
Claim to the Indemnitor. If the Indemnitor does not notify the Indemnitee within
the Notice Period that it disputes such Claim, the Indemnitor shall pay the
amount thereof to the Indemnitee. If the Indemnitor disputes the amount of such
Claim, and settlement among the parties cannot be reached within 45 days, the
controversy in question shall be submitted to arbitration pursuant to paragraph
13 hereafter. Once the amount in controversy has been settled either among the
parties or by virtue of arbitration or default, if the party against whom such
liability rests is an Acquiree Shareholder, then such Claim may be paid in cash
or in stock. Payments in stock by an Acquiree Shareholder may be made by
application to the Escrow Agent in accordance with the terms of the Escrow
Agreement.
(c) Cooperation of Parties. If either party
chooses to defend or participate in the defense of any liability, it shall have
the right to receive from the other party, subject to any restriction of
applicable law or that may be necessary to preserve the privilege of
attorney-client communications, any books, records or other documents within
such other party's control that are necessary or appropriate for such defense.
10. TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any
time prior to the Closing Date:
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(a) by mutual written consent of RCM and Acquiree;
(b) by any of RCM and Acquiree:
(i) if the Closing shall not have occurred by the
Closing Date unless such date is extended by the mutual written agreement of RCM
and Acquiree, and in such event, only until the date the Closing Date has been
so extended; provided, however, that the right to terminate this Agreement under
this Section 11(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of,or resulted
in, the failure of the Closing Date to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) If any party hereto shall default in the observance or in
the due and timely performance of any of the Covenants of the parties contained
in Section 5 of this Agreement, the non-defaulting party may, upon written
notice, terminate this Agreement and in that event, the defaulting party shall
indemnify, hold harmless and assume full and complete responsibility for any and
all expenses of the non-defaulting party incurred in this transaction, without
prejudice to its or their rights and remedies available under law, including the
right to recover expenses, costs and other damages. Notwithstanding the
foregoing, the non-defaulting party may elect to waive such breach by the
defaulting party and proceed with the Closing, thereby waiving any right to
damages as a result of such breach.
11. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or sent by overnight delivery, confirmed telecopy or prepaid
first class registered or certified mail, return receipt requested, to the
following addresses, or such other addresses as are given to the other parties
to this Agreement in the manner set forth herein:
11.1 If to RCM, to:
▇▇. ▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
RCM Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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with a courtesy copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
One Commerce Square
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
11.2 If to the Acquiree Shareholders, to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
11.3 If to the Acquiree, to:
The Consortium
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a courtesy copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notices shall be effective when delivered in person or sent by
telecopy, one business day after being sent by overnight delivery or three
business days after being sent by registered or certified mail. Any of the
foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of address shall be effective
only upon receipt.
12. ARBITRATION.
If a dispute arises as to interpretation of this Agreement, it
shall be decided finally by three arbitrators in an arbitration proceeding
conforming to the Rules of the American Arbitration Association applicable to
commercial arbitration. The arbitrators shall be appointed as follows: one by
RCM, one by the Acquiree Shareholders and the third by the said two arbitrators,
or, if they cannot agree, then the third arbitrator shall be appointed by the
American Arbitration Association. The third arbitrator shall be chairman of the
panel and shall be impartial. The arbitration shall take place in Princeton, New
Jersey. The decision of a majority of the Arbitrators shall be conclusively
binding upon the parties and final, and such decision shall be enforceable as a
judgment in any court of competent jurisdiction. Each party shall pay the fees
and expenses of the arbitrator appointed by it, its counsel and its witnesses.
The parties shall share equally the fees and expenses of the impartial
arbitrator.
13. MISCELLANEOUS.
13.1 Further Assurances. At any time, and from time to time,
after the Closing Date, each party will execute such additional instruments and
take such further action as may be reasonably requested by the other party to
confirm or perfect title to any property transferred hereunder or otherwise to
carry out the intent and purposes of this Agreement.
13.2 Nature of Representations and Warranties. All of
the parties hereto are executing and carrying out the provisions of
this Agreement in reliance on the representations, warranties,
covenants and agreements contained in this Agreement or at the
Closing of the transactions herein provided for, and any
investigation that they might have made or any other
representations, warranties, covenants, agreements, promises or
information, written or oral, made by the other party or parties or
any other person shall not be deemed a waiver of any breach of any
such representation, warranty, covenant or agreement.
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13.3 Survival of Representations. All covenants, agreements,
representations and warranties made herein shall survive the Closing Date for a
period of eighteen (18) months from the Closing Date, except such survival
period shall be unlimited where there is evidence of bad faith, fraud or wanton
misconduct. All covenants and agreements by or on behalf of the parties hereto
that are contained or incorporated in this Agreement shall bind and inure to the
benefit of the successors and assigns of all parties hereto.
13.4 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the
subject matter hereof. It supersedes all prior negotiations,
letters and understandings relating to the subject matter hereof.
13.5 Amendment. This Agreement may not be amended,
supplemented or modified in whole or in part except by an instrument in writing
signed by the party or parties against whom enforcement of any such amendment,
supplement or modification is sought.
13.6 Assignment. This Agreement may not be assigned by
any party hereto without the prior written consent of the other
parties.
13.7 Choice of Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of
New Jersey.
13.8 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this agreement.
13.9 Number and Gender. Words used in this Agreement,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context indicates is appropriate.
13.10 Construction. The parties hereto and their respective
legal counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
13.11 Effect of Waiver. The failure of any party at any time
or times to require performance of any provision of this Agreement will in no
manner affect the right to enforce the same. The waiver by any party of any
breach of any provision of this Agreement will not be construed to be a waiver
by any such party of any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
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\PHILA2\100322_5
13.12 Severability. The invalidity, illegality or
unenforceability of any provision or provisions of this Agreement will not
affect any other provision of this Agreement, which will remain in full force
and effect, nor will the invalidity, illegality or unenforceability of a portion
of any provision of this Agreement affect the balance of such provision. In the
event that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
13.13 Binding Nature. This Agreement will be binding upon
and will inure to the benefit of any successor or successors of the
parties hereto.
13.14 No Third-Party Beneficiaries. No person shall be deemed
to possess any third-party beneficiary right pursuant to this Agreement. It is
the intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
13.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
13.16 Facsimile Signature. This Agreement may be executed
and accepted by facsimile signature and any such signature shall be
of the same force and effect as an original signature.
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IN WITNESS THEREOF, the parties have executed this Agreement as of the
date first above written.
RCM TECHNOLOGIES, INC.
ATTEST
By: By:
Name:
Title:
THE CONSORTIUM
ATTEST
By: By:
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
