SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report August 30, 1995
(Date of earliest event reported)
RCM TECHNOLOGIES, INC.
(exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-10245 95-1480559
(Commission File Number) (IRS Employer
` Identification Number)
2500 McClellan Avenue, Pennsauken, NJ 08109-4613
(Address of principal executive offices) (Zip Code)
(609) 486 - 1777
Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
---------------------------------------------
On August 30, 1995, RCM Technologies, Inc. ("Registrant") acquired
Cataract, Inc., a Newtown, Pennsylvania-based supplier of management,
engineering, design and technical services to the nuclear power, fossil fuel,
electric utilities and process industries. The acquisition was completed through
a merger transaction (the "Merger") pursuant to which Cataract, Inc. was merged
with and into a newly-created subsidiary of the Registrant, which then
concurrently changed its name to "Cataract, Inc."
Following the Merger, the directors and executive officers of Cataract,
Inc. consist of Leon Kopyt and Stanton Remer.
The Merger consideration payable to the former shareholders of Cataract,
Inc. consisted of $2,000,000 cash and 1,561,553 restricted shares of the
Registrant's common stock (the "Shares") valued at $1,200,000 (based upon the
average closing bid price of the Registrant's common stock for the 30 calendar
days immediately preceding the closing date). The source of cash utilized in the
merger was $1,145,000 from the internal sources and $855,000 from the
Registrants' line of credit facility. The Registrant used an additional
$1,747,000 of the line of credit facility to satisfy certain loan obligations of
Cataract, Inc. at the closing. The acquisition has been accounted for under the
purchase method of accounting. The cost in excess of net assets acquired will be
approximately $3,000,000. It is anticipated the cost in excess of net assets
acquired will be amortized over a 15 to 20 year period.
The shares issued to the former Cataract, Inc. shareholders have been
pledged to the Company for a period of three years to secure the performance of
certain conditions subsequent to the Merger relating to the achievement of
certain levels of sales revenues that have been warranted by the former
Cataract, Inc. shareholders.
Following the expiration of the pledge period, the Shares are to be placed
in a voting trust until the earlier of: (i) the public or private sale of such
Shares in open market transactions to unaffiliated third parties; or (ii) the
resignation or removal from office of Leon Kopyt, currently Chief Executive
Officer and President of the Registrant. Notwithstanding the above, one-third of
the Shares shall be released from trust commencing upon the fifth anniversary of
the closing, and thereafter, an additional one-third of the Shares shall be
released from trust upon each of the sixth and seventh annual anniversaries of
the closing date.
During the period in which the Shares are subject to pledge and the voting
trust, the Shares are to be voted by the Registrant's Board of Directors on
behalf of the former shareholders of Cataract, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
------------------------------------------
Cataract, Inc. was incorporated on August 14, 1992 and commenced business
in May 1993 when it acquired substantially all of the operating assets of
Cataract, Inc. a Delaware corporation ("Cataract-Delaware"). The acquisition of
these assets was accomplished through a two-step process pursuant to which
Cataract, Inc. first purchased the interest of a principal lender in certain
debt instruments that had been in default and were secured by substantially all
of the assets of Cataract-Delaware; and thereafter through a consenual transfer
of such assets in lieu of foreclosure.
By virture of certain common ownership and the continuation of its historic
business, Cataract, Inc. may be viewed as the successor to the business of
Cataract-Delaware for financial accounting purposes. According, the financial
statements presented include those periods prior to May 1993 when the business
was operated by Cataract-Delaware.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Audited Balance Sheets, October 2, 1994 and October 1, 1993
Audited Statement of Income,
Years ended October 2,1994, October 1, 1993 and September 25, 1992
Audited Statement of Changes in Stockholders' Equity,
Years ended October 2, 1994, October 1, 1993 and September 25, 1992
Audited Statements of Cash Flows,
Years ended October 2, 1994, October 1, 1993 and September 25, 1992
Unaudited Balance Sheet, April 2, 1995
Unaudited Statements of Income for the Three Month Periods
Ended July 2, 1995 and July, 3, 1995
Unaudited Statements of Income for the Nine Month Periods
Ended July 2, 1995 and July 3, 1994
Unaudited Statement of Changes in Shareholders' Equity for
the Nine Month Period Ended July 2, 1995
Unaudited Statements of Cash Flows for the Nine Month Periods
Ended July 2, 1995 and July 3, 1994
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Balance Sheets,
October 31, 1994 and July 31, 1995
Unaudited Pro Forma Condensed Combined Statements of Income
for the year ended October 31, 1994 and the nine months
ended July 31, 1995.
(c) EXHIBITS
(1) Merger Agreement, dated July 31, 1995
(2) Registration Rights Agreement, dated August 30, 1995
(3) Voting Trust Agreement, dated August 30, 1995
(4) Investor Representation Certificate,dated August 30, 1995
(5) Stock Pledge Agreement, dated August 30, 1995
<PAGE>
ITEM 7. (a) FINANCIAL STATEMNETS OF BUSINESS ACQUIRED
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
Financial Statements for the Fiscal Years (Fifty-Two Weeks) Ended
September 25, 1992, October 1, 1993
and October 2, 1994
and
Independent Accountants' Audit Report
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
Contents
Page
Accountants' report ........................................... 1-2
Financial statements
Balance sheets ........................... ............ 3
Statements of operations .............................. 4
Statements of retained earnings ....................... 5
Statements of cash flows ............................. 6-7
Notes to financial statements ....................... 8-13
<PAGE>
Board of Directors and Stockholders
Cataract, Inc.(a Pennsylvania corporation) and
Cataract, Inc. (a Delaware corporation)
Newtown, Pennsylvania
INDEPENDENT ACCOUNTANTS' AUDIT REPORT
We have audited the accompanying balance sheets of Cataract, Inc. (a
Pennsylvania corporation), as of October 1, 1993 and October 2, 1994, and the
related statements of operations, retained earnings, and cash flows for the year
ended October 2, 1994. We have also audited the statement of operations for
Cataract, Inc. (a Delaware corporation) for the year ended September 25, 1992
and the related statements of retained earnings and cash flow. We have also
audited the combined statement of operations for Cataract, Inc. (a Pennsylvania
corporation) and Cataract, Inc. (a Delaware corporation) for the year ended
October 1, 1993 and the related statements of retained earnings and cash flow.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and combined financial statements
referred to above present fairly, in all material respects, the financial
position of Cataract, Inc. (a Pennsylvania corporation) as of October 1, 1993
and October 2, 1994, and the results of Cataract, Inc.'s (a Pennsylvania
corporation) and Cataract, Inc.'s (a Delaware corporation) operations and their
cash flows for the years ended September 25, 1992, and October 1, 1993 and in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Cataract, Inc. (a Delaware corporation) will continue as a going concern. As
described in Note 2 to the financial statements, Cataract, Inc.'s (a Delaware
corporation) recurring losses from operations, negative working capital,
stockholders' deficit and noncompliance with provisions of certain loan
agreements raise substantial doubt about its ability to continue as a going
concern. Management's plan concerning these matters are described in Note 2.
In May of 1993 substantially all of Cataract, Inc.'s ( a Delaware
corporation) assets were disposed of, see note 13. The operations of Cataract,
Inc. ( a Delaware corporation) ceased as of May 31, 1993.
Burns, Boyle and Company, CPAs PC
August 22, 1995
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
BALANCE SHEETS
OCTOBER 1, 1993 and OCTOBER 2, 1994
<TABLE>
<CAPTION>
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1, 983 $ 135,817
Accounts receivable:
Trade (net of allowance of $10,800 and $10,000) 3,096,587 2,722,308
Other 20,340 10,422
Work in progress 220,563 327,956
Note receivable 2,806 6,058
Prepaid expenses and other current assets 71,505 79,914
------ ------
Total current assets 3,413,784 3,282,475
--------- ---------
FURNITURE AND EQUIPMENT - At cost, less accumulated
depreciation of $34,753 and $7,083 158,625 116,525
------- ------ ------- -------
OTHER ASSETS
Organization cost (net of amortization) 40,660 43,653
Purchased contracts (net of amortization) 149,426 491,707
Goodwill (net of amortization) 25,762 27,659
------ ------
Total other assets 215,848 563,019
------- -------
TOTAL $3,788,257 $3,962,019
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Shareholders loans $ 0 $ 200,000
Line of credit 1,127,170 0
Accounts payable and accrued expenses 613,278 639,899
Accrued payroll, bonuses, and taxes 981,737 1,000,765
Accrued corporation taxes 40,985 4,375
Current maturities of long-term debt 0 597,561
- -------
Total current liabilities 2,763,170 2,442,600
--------- ---------
LONG -TERM DEBT, less current maturities 1,000,000 1,500,000
--------- ---------
STOCKHOLDERS' EQUITY
Common stock 1,000 1,000
Additional paid-in capital 1,000 1,000
Retained earnings (deficit) 23,087 17,419
------ ------
25,087 19,419
------ ------
TOTAL $3,788,257 $3,962,019
========== ==========
</TABLE>
See Independent Accountants' Audit Report and Notes to the Financial statements.
-3-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
STATEMENTS OF OPERATIONS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
<TABLE>
<CAPTION>
Cataract, Inc. Cataract Cataract, Inc.
(Pennsylvania) (Combined) (Delaware)
10/2/94 10/1/93 9/25/92
<S> <C> <C> <C>
SERVICE REVENUE $20,027,006 $21,097,210 $19,636,632
COST OF SERVICES RENDERED 17,356,535 17,966,214 16,570,183
---------- ---------- ----------
GROSS MARGIN 2,670,471 3,130,996 3,066,449
--------- --------- ---------
GENERAL AND ADMINISTRATIVE EXPENSES 1,567,846 2,383,340 2,608,932
INTEREST EXPENSE 313,098 860,231 1,116,920
DEPRECIATION & AMORTIZATION EXPENSE 374,841 191,526 57,351
OTHER INCOME (62,150) (17,180) (12,430)
------- ------- -------
TOTAL 2,193,635 3,417,917 3,770,773
NET INCOME (LOSS) BEFORE TAXES 476,836 (286,921) (704,324)
------- -------- --------
INCOME TAXES 31,168 4,375 0
------ ----- -
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 445,668 (291,296) (704,324)
EXTRAORDINARY ITEM - termination of business 0 (6,121,815) 0
- ---------- -
NET INCOME (LOSS) $ 445,668 $(6,413,111) $ (704,324)
========== =========== ==========
</TABLE>
See Independent Accountants' Audit Report and Notes to the Financial Statements.
-4-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
STATEMENT OF RETAINED EARNINGS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED OCTOBER 1, 1993
AND OCTOBER 2, 1994
<TABLE>
<CAPTION>
Cataract Cataract
Pennsylvania Delaware
<S> <C> <C>
BALANCE September 30, 1991 ........................ $ 0 $ (6,226,940)
Net Loss ........................................... 0 (704,324)
- --------
BALANCE September 25, 1992 .......................... 0 (6,931,264)
Net Profit(Loss) ................................... 17,419 (6,430,530)
Disposal of Unearned Compensation ................. 0 10,000,000
- ----------
BALANCE October 1, 1993 ........................... 17,419 $ (3,361,794)
== ==== ============
Net Profit ...................................... 445,668
Dividend ........................................ (440,000)
--------
BALANCE October 2, 1994 ......................... $ 23,087
============
</TABLE>
See Independent Accountants' Audit Report and Notes to the Financial Statements
-5-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
STATEMENTS OF CASH FLOWS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992
OCTOBER 1, 1993 AND OCTOBER 2, 1994
<TABLE>
<CAPTION>
Cataract, Inc. Cataract Cataract, Inc
Pennsylvania Combined Delaware
10/2/94 10/1/93 9/25/92
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 445,668 $(291,296) $(704,324)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 374,841 191,526 57,351
Bad debt expense 800 10,000 11,000
Changes in assets and liabilities which provided (used) cash:
Accounts receivable:
Trade (375,079) (2,200,818) (947,162)
Other (9,918) (5,883) 14,648
Work in progress 107,393 (327,956) 0
Note receivable 3,252 (3,967) 2,753
Prepaid expenses and other current assets 8,409 (74,388) (139,633)
Accounts payable and accrued expenses (26,621) 277,146 13,220
Accrued corporation taxes 36,610 4,375 0
Accrued interest 0 437,066 902,320
Accrued payroll, bonuses, and taxes (19,028) 731,221 299,102
------- ------- -------
Net cash used in operating activities 546,327 (1,104,198) (493,725)
------- ---------- --------
INVESTING ACTIVITIES:
Additions to furniture and equipment (69,770) (123,608) (3,880)
Addition to other assets 0 (730,964) 0
- -------- -
Net cash used in investing activities (69,770) (854,572) (3,880)
------- -------- ------
FINANCING ACTIVITIES:
Dividends paid (440,000) 0 0
Additional paid in capital 0 1,000 0
Proceeds from (repayment of ) shareholder loans (200,000) 200,000 0
Borrowing from (repayment of) line of credit (net) 1,127,170 0 480,000
Borrowing of long term debt 0 2,347,561 0
Repayments of long term debt (1,097,561) (340,680) (26,372)
---------- -------- -------
Net cash provided by financing activities (610,391) 2,307,881 453,628
-------- --------- -------
</TABLE>
See Independent Accountants' Audit Report and Notes to the Financial Statements
-6-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
STATEMENTS OF CASH FLOWS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992
OCTOBER 1, 1993 AND OCTOBER 2, 1994
Continued
<TABLE>
<CAPTION>
Pennsylvania Combined Delaware
10/2/94 10/1/93 9/25/92
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH DUE TO OPERATIONS (133,834) 349,111 (40,977)
NET DECREASE IN CASH DUE TO EXTRAORDINARY ITEM 0 (222,249) 0
CASH, BEGINNING OF YEAR 135,817 8,955 48,932
------- ----- ------
CASH, END OF YEAR $ 1,983 $ 135,817 $ 7,955
======== ========= ========
</TABLE>
See Independent Accountants' Audit Report and Notes to the Financial Statements.
-7-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
NOTE 1 - BUSINESS
Cataract, Inc., (a Pennsylvania corporation)("Cataract PA") was
incorporated in Pennsylvania on August 14, 1992, under the name ENTE,
Inc. In May of 1993, the Company purchased from Prudential Insurance
Company of America (Prudential) warrants and notes payable to
Prudential by Cataract, Inc. (a Delaware corporation) ("Cataract DE").
At the time of the purchase, the notes were in default. Cataract PA
then entered into a collateral surrender agreement with Cataract DE.
As part of this agreement, Cataract DE transferred title to the
majority of its assets to Cataract PA. Cataract PA agreed to assume
some of Cataract DE's liabilities and made a conditional agreement not
to sue.
Both Cataract PA and Cataract DE furnishes engineering, technical and
administrative support personnel services on a contract basis
primarily to the nuclear power industry, fossil fuel electric
utilities and the process industry.
NOTE 2 - GOING CONCERN CONSIDERATIONS
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. However,
on May 31, 1993, Cataract DE surrendered most of its assets to
Cataract PA to avoid a foreclosure. The gain and losses from this
surrender are included in the extraordinary item.
Cataract DE ceased operations in May of 1993.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Combining - The activity of both Cataract DE and Cataract PA
have been combined by adding together there respective results of
operations, cash flows and changes in retained earnings. No
adjustments were made for the transaction between the companies. The
activity for Cataract DE is for the period September 26, 1992 to May
30, 1993, the activity for Cataract PA is for the period June 1, 1993
to October 1, 1993.
See Independent Accountants' Audit Report
-8-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Method of Accounting - The Companies uses the accrual method of
accounting for financial statement presentations.
Revenue Recognition - Revenues are recognized when earned in
accordance with project agreements.
Work in Progress - Work in progress is the value of work performed as
of the balance sheet date, but not yet billed.
Furniture and Equipment - Furniture and equipment is stated at cost.
Depreciation is calculated using the straight-line method based on the
estimated useful lives of the related assets.
Organization Costs - Organization costs are the costs involved in
forming the Company and the cost to enter into the collateral
surrender agreement with Cataract DE. These costs are being amortized
over 15 years.
Purchased Contracts - Purchased contract is the cost assigned to the
value of contracts entered into by Cataract DE, but to be completed by
the Cataract PA. These costs are being amortized over their estimated
useful life. Estimated useful life was based on the projected revenue
flow of the contracts purchased.
Goodwill - Goodwill is the unallocated cost of the Cataract DE
transaction. The net purchase price of the assets of Cataract DE was
assigned to fixed assets and purchased contracts. The balance is
Goodwill. Goodwill is being amortized over 15 years.
See Independent Accountants' Audit Report
-9-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
NOTE 4 - SHAREHOLDER LOANS
Shareholder loans as of October 1, 1993 and October 2, 1994 consisted
of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
15% Demand loan from Mr. & Mrs. Robert
Starer, 45% shareholder ........... $ 0 $ 90,000
15% Demand loan from Mr. & Mrs. James
Affleck, 10% shareholder .......... 0 20,000
15% Demand loan from Mr. & Mrs. Joseph
Marubbio, 45% shareholder ......... 0 90,000
-- - ------
$ 0 $200,000
======== ========
</TABLE>
NOTE 5 - LONG TERM DEBT
On May 25, 1993, Cataract PA borrowed $2,250,000 from a group of
lenders composed of Riverside Capital Advisers, Inc., Riverside Income
Fund Trust, Siemens Master Pension Trust the Blackstone Family
Investment Partnership, L.P., and the Hoechst Celanese Corporation
Employee Benefit Master Trust (Riverside). The proceeds from this
loan, plus other funds, were used to purchase a package of securities
and obligations of Cataract DE owned by Prudential.
There are a number of restrictive covenants under Cataract PA's
borrowing arrangements with Riverside, including prohibitions against
payment of some dividends and redemption, purchase or acquisition of
any shares of Cataract PA's stock and repayment of shareholder loans.
The agreement also contains prohibitions against incurring additional
debt and selling significant assets of the Cataract PA.
As of October 2, 1994, Cataract PA was in violation of the prohibition
on payment of dividends in excess of the tax liability of the
shareholders that was attributable to the "S" corporation earning of
the Company.
See Independent Accountants' Audit Report
-10-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
NOTE 5 - LONG TERM DEBT (continued)
Substantially all assets of Cataract PA are pledged as collateral for
its outstanding borrowings, including the revolving credit facility.
As of October 1, 1993 and October 2, 1994, the long term debt is
made up of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
15% Note Payable Riverside due December
5, 1995 $1,000,000 $2,000,000
15% Note Payable St. Peters College
leveraged asset trust - 1989(A) - due
May 5, 1994 0 97,561
- ------
1,000,000 2,097,561
Current portion 0 597,561
- -------
Long term $1,000,000 $1,500,000
========== ==========
Maturities of long term debt are as follows:
Year Ending
1995 0 0
1996 $1,000,000 $1,500,000
</TABLE>
NOTE 6 - LINE OF CREDIT
Cataract PA established a $4,000,000 revolving credit facility
with Textron Financial Corporation in March of 1994. Borrowing on
this line of credit is based on a percentage of qualified
outstanding trade accounts receivable. Interest is paid on the
outstanding balance at a rate of 2% over prime. As of October 2,
1994 the balance payable on this line was $1,127,170.
See Independent Accountants' Audit Report
-11-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
NOTE 7 - STOCK PURCHASE OPTIONS
As part of the transaction when Cataract PA purchased Cataract
DE's notes from Prudential, Cataract PA granted options to
purchase 15% of the Cataract PA's stock to a number of trusts
controlled by Prudential. There are a number of events which can
trigger the right to exercise the options. These events are as
follows:
1. Sale of substantially all of the assets of the Cataract PA.
2. The filing of a public offering for the sale of Cataract PA stock.
3. The merger of the Cataract PA into another entity.
4. The dissolution and liquidation of the Cataract PA.
NOTE 8 - INCOME TAXES
The provisions for income taxes consist of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal tax provision $ 0 $3,075 $ 0
State tax provision 25,430 1,300 0
------ ----- -
Total $25,430 $4,375 $ 0
======= ====== =========
</TABLE>
As of October 2, 1993, Cataract PA elected to be an "S"
Corporation for the federal government, as a result, the net income,
or loss, will flow through to the individual shareholders individual
federal income tax return. For state tax purposes the company is a "C"
corporation, as a result state corporation net income taxes are due on
Cataract PA profits. Cataract DE had a net operating loss in 1992, as
a result, no income taxes were accrued.
NOTE 9 - SELF-FUNDED GROUP MEDICAL INSURANCE
The Cataract PA provides group medical insurance to its
employees on a self-funded basis up to $45,000 per insured
individual to an annual aggregate limitation of $955,000.
Amounts in excess of these thresholds are covered by
insurance policies. Management believes that adequate
reserves have been recorded to cover claims incurred but not
reported as of October 1, 1993 and October 2, 1994.
See Independent Accountants' Audit Report
-12-
<PAGE>
CATARACT, INC.
(a Pennsylvania corporation)
and
CATARACT, INC.
(a Delaware corporation)
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS (FIFTY-TWO WEEKS) ENDED SEPTEMBER 25, 1992,
OCTOBER 1, 1993 AND OCTOBER 2, 1994
NOTE 10 - EMPLOYEE BENEFIT PLANS
Cataract PA maintains a number of health and welfare plans and a 401(K) plan.
The health and welfare plans require an employee and employer contribution. The
401(K) plan only requires an employee contribution.
NOTE 11 - LEASING ARRANGEMENTS
The Companies conducts their operations from a number of leased facilities.
All of these leases are on a month by month basis or expire within one year.
NOTE 12 - RELATED PARTY TRANSACTIONS
The Companies lease some of their office facilities from a stockholder and
officer. The lease with the stockholder and officer provides for monthly
rentals, on a month-to-month basis, of $6,104 up to October 1, 1994 and $6,697
there after.
The Companies charge a number of corporations for administrative services
and other costs. Some of these corporations are related to the Company through
common shareholders.
NOTE 13 - EXTRAORDINARY ITEM
On May 31, 1993, Cataract DE surrendered most of its assets to Cataract PA
to avoid a foreclosure. The gain and losses from this surrender are included in
the extraordinary item. This item includes the abandonment of the deferred
compensation and the advanced contributions to the employee stock ownership
trust.
See Independent Accountants' Audit Report
-13-
<PAGE>
Cataract, Inc
Financial Statements
July 2, 1995 and July 3, 1994
(Unaudited)
<PAGE>
CATARACT, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Balance Sheets as of July 2, 1995 (Unaudited)
and October 2, 1994 (Audited) 2-3
Unaudited Statements of Income for the Three Month
Periods Ended July 2, 1995 and July 3, 1994 4
Unaudited Statements of Income for the Nine Month
Periods Ended July 2, 1995 and July 3, 1994 5
Unaudited Statement of Changes in Shareholders' Equity
for the Nine Month Period Ended July 2, 1995 6
Unaudited Statements of Cash Flows for the Nine Month
Periods Ended July 2, 1995 and July 3, 1994 7-8
Notes to Unaudited Financial Statements 9-10
</TABLE>
2
<PAGE>
CATARACT, INC.
BALANCE SHEETS
July 2, 1995 and October 2, 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash $ 1,995 $ 1,983
Accounts receivable, net of allowance for doubtful accounts
of $10,800 at each date 3,251,498 3,340,296
Prepaid expenses and other current assets 149,009 71,505
------- ------
Total current assets 3,402,502 3,413,784
--------- ---------
Property and equipment, at cost
Equipment and leasehold improvements 211,218 193,378
Less: accumulated depreciation and amortization 58,913 34,753
------ ------
152,305 158,625
------- -------
Other assets
Deferred charges 85,429 215,848
------ -------
Total assets $3,640,236 $3,788,257
========== ==========
</TABLE>
3
<PAGE>
CATARACT, INC.
BALANCE SHEETS - Continued
July 2, 1995 and October 2, 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities
Line of Credit $ 1,528,184 $ 1,127,170
Accounts payable and accrued expenses 401,809 613,278
Accrued payroll and payroll taxes payable 695,709 981,737
Income taxes payable 7,022 40,985
----- ------
Total current liabilities 2,632,724 2,763,170
--------- ---------
Long term debt 1,000,000 1,000,000
Shareholders' equity
Common stock, $0.002 stated value; 1,000,000 shares authorized;
500,000 issued and outstanding 1,000 1,000
Additional paid-in capital 1,000 1,000
Retained earnings 5,512 23,087
----- ------
7,512 25,087
----- ------
Total liabilities and shareholders' equity $3,640,236 $3,788,257
========== ==========
</TABLE>
4
<PAGE>
CATARACT, INC.
STATEMENTS OF INCOME
Three Months Ended July 2, 1995 and July 3, 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues
Sales of services $ 5,786,997 $ 4,485,506
Other income 8,250 6,400
----- -----
Total revenues 5,795,247 4,491,906
--------- ---------
Cost and expenses
Cost of services 5,179,568 3,876,215
Selling, general and administrative 386,968 373,741
Depreciation and amortization 38,035 63,807
Interest expense 84,835 70,096
------ ------
Total costs and expenses 5,689,406 4,383,859
--------- ---------
Income before income taxes 105,842 108,047
Provision for state income taxes 7,400 7,500
----- -----
Net income $ 98,442 $ 100,547
============ ==========
Net income per share: $ .20 $ .20
============ ==========
Weighted average number of shares outstanding: 500,000 500,000
======= =======
</TABLE>
5
<PAGE>
CATARACT, INC.
STATEMENTS OF INCOME
Nine Months Ended July 2, 1995 and July 3, 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues
Sales of services $16,182,238 $15,388,831
Other income 23,857 18,922
------ ------
Total revenues 16,206,095 15,407,753
---------- ----------
Cost and expenses
Cost of services 14,303,190 13,331,817
Selling, general and administrative 1,137,896 1,139,584
Depreciation and amortization 154,578 291,917
Interest expense 230,328 244,480
------- -------
Total costs and expenses 15,825,992 15,007,798
---------- ----------
Income before income taxes 380,103 399,955
Provision for state income taxes 19,516 32,000
------ ------
Net income $ 360,587 $ 367,955
========== ==========
Net income per share: $ .72 $ .74
========== ==========
Weighted average number of shares outstanding: 500,000 500,000
======= =======
</TABLE>
6
<PAGE>
CATARACT, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Nine Months Ended July 2, 1995
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
------ ------ ------- --------
<S> <C> <C> <C> <C>
Balance, October 2, 1994 500,000 $ 1,000 $ 1,000 $ 23,087
Net income 360,587
Shareholder distributions ( 377,901)
--------
Balance, July 2, 1995 500,000 $ 1,000 $ 1,000 $ 5,512
======= ======== ========== ========
</TABLE>
7
<PAGE>
CATARACT, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended July 2, 1995 and July 3, 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 360,587 $ 367,955
------------ -----------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 154,579 291,917
Provision for losses on accounts
receivable 800
Changes in assets and liabilities:
Accounts receivable 88,798 34,847
Prepaid expenses and other
current assets ( 77,504) ( 16,995)
Accounts payable and accrued expenses ( 211,469) ( 211,144)
Accrued payroll and payroll taxes payable ( 286,028) ( 97,926)
Income taxes payable ( 33,963) 28,594
------ ------
Total adjustments ( 365,587) ( 30,093)
------- ------
Net cash provided by (used in) operating activities ( 5,000) 398,048
----- -------
</TABLE>
8
<PAGE>
CATARACT, INC.
STATEMENTS OF CASH FLOWS - Continued
Nine Months Ended July 2, 1995 and July 3, 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from investing activities:
Property and equipment acquired ( 17,840) ($ 49,702)
------------------------------- ------- -------
Net cash used in investing activities ( 17,840) ( 49,702)
------ ------
Cash flows from financing activities:
Shareholder distributions ( 377,901) ( 320,001)
Net borrowing (repayments) under
short term debt arrangements 400,753 337,738
Repayments of long term debt ( 500,000)
------- -------
Net cash used in financing activities 22,852 ( 482,263)
------ -------
Net increase (decrease) in cash 12 ( 133,917)
Cash at beginning of period 1,983 135,817
----- -------
Cash at end of period $ 1,995 $ 1,900
=========== ==========
Supplemental cash flow information:
Cash paid for:
Interest expense $ 230,328 $ 244,480
Income taxes $ 53,479 $ 3,406
</TABLE>
9
<PAGE>
CATARACT, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. General
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). This Report on should be read in conjunction with the
Company's annual audited financial statements for the year ended October 2,
1994. Certain information and footnote disclosures which are normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
SEC rules and regulations. The information reflects all normal and
recurring adjustments which, in the opinion of Management, are necessary
for a fair presentation of the financial position of the Company and its
results of operations for the interim periods set forth herein. The results
for the nine months ended July 2, 1995 are not necessarily indicative of
the results to be expected for the full year.
2. Income per Share
Income per share is based on the weighted average number of common shares
outstanding during the periods. For the nine months ended July 2, 1995 and
July 3, 1994, the weighted average number of shares outstanding was
500,000.
3. Income Taxes
From inception through August 30, 1995, the Board of Directors, with the
consent of the shareholders elected to be taxed as an S Corporation for
federal income tax purposes. An S election was made in those states which
recognize such status. Accordingly, there are no provisions for federal
income taxes and the state income tax expense is disportionate to income
before taxes. As of August 30, 1995, concurrent with the merger of
Cataract, Inc. into CI Acquisition Corp., the S elections were terminated.
All accumulated earnings of Cataract, Inc. to the effective date of the
merger were distributed to then existing shareholders.
4. Contingencies
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party or to which any of their property is subject.
10
<PAGE>
ITEM 7 (b) PRO FORMA FINANCIAL INFORMATION
------------------------------------------
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the acquisition of Cataract, Inc. by RCM Technologies, Inc. (RCM)
pursuant to a Merger transaction that was completed on August 30, 1995. This pro
forma information has been prepared utilizing the historical financial
statements of RCM and Cataract. This information should be read in conjunction
with the historical financial statements and notes thereto of RCM which are
incorporated by reference to RCM's Form 10-K and the historical financial
statements of Cataract which is incorporated within this Form 8-K. The pro forma
financial data is provided for comparative purposes only and does not purport to
be indicative of the results which actually would have been obtained if the
Merger had been effected on the dates indicated or of the results which may be
obtained in the future.
The pro forma financial information is based on the purchase method of
accounting for the Merger. The pro forma adjustments are described in the
accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet and
Notes to Unaudited Pro Forma Condensed Combined Statement of Income. The
Unaudited Pro Forma condensed combined statements of income for the year ended
October 31, 1994 and the nine months ended July 31, 1995 assume that the
acquisition of Cataract had occurred on November 1, 1993 (combining the results
for the year ended October 31, 1994, for RCM and the year ended October 2, 1994,
for Cataract and combining the results for the nine months ended July 31, 1995
for RCM and the nine months ended July 2, 1995, for Cataract). The unaudited pro
forma condensed combined balance sheets at October 31, 1994 and July 31, 1995
assumes that the acquisition of Cataract had occurred on October 31, 1994
(combining the balance sheets for RCM and Cataract as of October 31, 1994, and
October 2, 1994, respectively and combining the balance sheets for RCM and
Cataract as of July 31, 1995 and July 2, 1995, respectively).
Acquisition
The total purchase price for the shares acquired by cash and the issuance
of RCM Common Stock was $3,200,000 plus estimated acquisition costs of
approximately $100,000. The pro forma condensed combined financial statements
have been prepared assuming the acquisition is effectuated as follows:
1. Issuance of 1,561,553 shares of RCM Common Stock based on a market price
of RCM Common Stock of $.7685 per share.
2. Payment of cash of $2,000,000 financed by short-term borrowing of
$855,000 and the use of internal funds of $1,145,000.
Assumptions
Purchase Price Allocation
Although neither RCM or Cataract has complete information at this time as
to the fair values of Cataract's individual assets and liabilities, an estimate
of the eventual allocation of the purchase price was made on the basis of
available information. The eventual allocation of the purchase price will be
made on the basis of appraisals and valuations which give effect to various
factors including the nature and intended future use of assets acquired in
determining their value. It is not anticipated that any change in the allocation
price will be material from the pro forma adjustments.
For purpose of pro forma presentations, the excess purchase price over the
net assets acquired is being amortized over an estimated life of twenty (20)
years.
Interest Expense
The pro forma financial information reflects the refinancing of $1,000,000
of long-term debt of Cataract bearing interest at 15% per annum from the
proceeds of borrowing from the line of credit facility from RCM. Interest on
short term borrowing of $855,000 has been reflected at a rate of 8.75% (prime
rate), the current effective incremental borrowing rate for RCM.
<PAGE>
RCM TECHNOLOGIES, INC. AND CATARACT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
OCTOBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
RCM Technologies, Inc Cataract, Inc.
October 31, 1994 October 2, 1994 Adjustments Combined
---------------- --------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents .............. $ 2,534,073 $1,983 ($1,145,000)(a) $ 1,391,056
Accounts and notes receivable ........... 3,500,079 3,340,296 6,840,375
Prepaid expenses and other current assets 319,793 71,505 391,298
--------- ---------- ---------- ---------
Total current assets .................... 6,353,945 3,413,784 (1,145,000) 8,622,729
--------- --------- --------- ---------
Property and equipment-net .............. 133,612 158,625 292,237
Unallocated excess of purchase price over
net assets acquired .................. 3,174,913 (d) 3,174,913
Other Assets ............................ 178,755 215,848 394,603
------- ------- -------
Total ................................... $ 6,666,312 $ 3,788,257 $ 2,029,913 $12,484,482
=========== =========== =========== ===========
Liabilities and Shareholders' Equity:
Notes payable ........................... 38,901 1,127,170 855,000 (a) $ 3,021,071
1,000,000 (b)
---------
Other current liabilities ............... 1,114,435 1,636,000 2,750,435
--------- --------- ---------
Total current liabilities ............... 1,153,336 2,763,170 1,855,000 5,771,506
--------- --------- --------- ---------
Long term obligations ... .............. 35,496 1,000,000 (1,000,000)(b) 35,496
Shareholders' equity .................... 5,477,480 25,087 1,174,913 (c) 6,677,480
--------- ------ --------- ---------
Total ................................... $ 6,666,312 $ 3,788,257 $ 2,029,913 $12,484,482
=========== =========== =========== ===========
<FN>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
-------------------------------------------------------------
(a) to record issuance of short-term borrowings and use of internal cash to
finance acquisition
(b) to record repayment of long-term debt
(c) to record issuance of RCM Technologies, Inc. common stock in exchange for
all the shares of Cataract, Inc.
(d) to record RCM Technologies, Inc. acquisition of the Cataract, Inc. stock
and eliminate Cataract, Inc. shareholders' investment as follows:
Purchase price .............................................. $3,200,000
Shareholders' investment, as reported ....................... 25,087
------
Unallocated excess of purchase price over net assets acquired $3,174,913
==========
</FN>
</TABLE>
<PAGE>
RCM TECHNOLOGIES, INC. AND CATARACT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED OCTOBER 31, 1994
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
RCM Technologies, Inc Cataract, Inc.
October 31, 1994 October 2, 1994 Adjustments Combined
---------------- --------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues ................................ $ 29,297,216 $ 20,089,156 ($ 40,075)(d) $ 49,346,297
---------- ------------ ------------ ------------
Cost and expenses
Cost of services ....................... 23,863,889 17,356,535 41,220,424
Selling, general and administrative .... 3,708,298 1,567,846 5,276,144
Interest expense ....................... 18,840 313,098 76,950 (b) 311,126
(97,762)(c)
Depreciation and amortization .......... 93,141 374,841 158,746 (a) 626,728
Total .................................... 27,684,168 19,612,320 137,934 47,434,422
---------- ---------- ------- ----------
Income before income taxes ............ 1,613,048 476,836 (178,009) 1,911,875
Income taxes .......................... 187,043 31,168 (21,361)(e) 196,850
------- ------ -------
(162,124)(f)
162,124 (f)
-------
Net Income ............................. $ 1,426,005 $445,668 ($156,648) $1,715,025
========= ======== ======== =========
Net income per common share . $0.10 $0.89 $0.11
===== ===== =====
Average number of common
shares outstanding .................. 14,651,381 500,000 16,212,934
========== ======= ==========
<FN>
NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
------------------------------------------------------------------
(a) to provide for amortization on excess purchase price over net assets
acquired based on an estimated life of 20 years.
(b) to recognize interest expense on debt to be issued in connection with
the acquisition.
(c) to reflect reduction of interest expense due to a refinancing of the
debt of Cataract, Inc. from 15% to 9% per annum.
(d) to reduce interest income on internal funds used for cash consideration.
(e) to record income tax effect of interest expense, interest income and
amortization adjustments at an effective rate of 12% net of utilization of
RCM Technologies, Inc. Federal Net Operating Loss Carryfoward. (N.O.L.)
(f) to provide Federal Income Taxes on Cataract, Inc. (an S-Corp.) and
utilization of RCM's N.O.L.
</FN>
</TABLE>
<PAGE>
RCM TECHNOLOGIES, INC. AND CATARACT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JULY 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
RCM Technologies, Inc Cataract, Inc.
July 31, 1995 July 2, 1995 Adjustments Combined
------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents ................... $ 3,195,600 $ 1,995 ($ 1,145,000)(a) $ 1,963,289
(89,306)(e)
Accounts and notes receivable ............... 2,689,263 3,251,498 5,940,761
Prepaid expenses and other current assets ... 579,459 149,009 728,468
------- ------- -------
Total current assets ........................ 6,464,322 3,402,502 (1,234,306) 8,632,518
--------- --------- ---------- ---------
Property and equipment-net .................. 127,282 152,305 279,587
Unallocated excess of purchase price over net
assets acquired ........................... 3,174,913 (d) 3,095,540
(79,373)(e)
-------
Other Assets ................................ 310,893 85,429 396,322
------- ------ -------
Total ....................................... $ 6,902,497 $ 3,640,236 $ 1,861,234 $ 12,403,967
============ ============ ============ ============
Liabilities and Shareholders' Equity:
Notes payable ............................... 116,856 1,528,184 855,000 (a) $ 3,500,040
1,000,000 (b)
---------
Other current liabilities ................... 688,259 1,104,540 1,792,799
------- --------- ---------
Total current liabilities ................... 805,115 2,632,724 1,855,000 5,292,839
------- --------- --------- ---------
Long term obligations ....................... 43,447 1,000,000 (1,000,000)(b) 43,447
Shareholders' equity ........................ 6,053,935 7,512 1,174,913 (c) 7,067,681
--------- ----- ---------
(168,679)(e)
--------
Total ....................................... $ 6,902,497 $ 3,640,236 $ 1,861,234 $ 12,403,967
============ ============ ============ ============
<FN>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
-------------------------------------------------------------
(a) to record issuance of short-term borrowings and use of internal cash to
finance acquisition as of October 31, 1994
(b) to record repayment of long-term debt
(c) to record issuance of RCM Technologies, Inc. common stock in exchange for
all the shares of Cataract, Inc.
(d) to record RCM Technologies, Inc. acquisition of the Cataract, Inc. stock
and eliminate Cataract, Inc. shareholders' investment as follows:
Purchase price ............................................... $3,200,000
Shareholders' investment, as reported ....................... 25,087
------
Unallocated excess of purchase price over net assets acquired $3,174,913
==========
(e) to record the effect of Pro Forma adjustments resulting from the statement
of operations for the nine months ended July 31, 1995
</FN>
</TABLE>
<PAGE>
RCM TECHNOLOGIES, INC. AND CATARACT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED JULY 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
RCM Technologies, Inc Cataract, Inc.
July 31, 1995 July 2, 1995 Adjustments Combined
------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues .............................. $ 18,116,117 $ 16,206,095 ($ 30,056)(d) $ 34,292,156
------------ ------------ ------------ ------------
Cost and expenses
Cost of services .................. . 14,788,433 14,303,190 29,091,623
Selling, general and administrative . 2,542,051 1,137,896 3,679,947
Interest expense .................... 36,954 230,328 74,813 (b) 268,773
(73,321)(c)
Depreciation and amortization ....... 97,071 154,578 119,059 (a) 370,708
------ ------- ------- -------
Total ................................. 17,464,509 15,825,992 120,550 33,411,051
---------- ---------- ------- ----------
Income before income taxes ............ 651,608 380,103 (150,607) 881,104
Income taxes ....................... 75,133 19,516 (18,073)(e) 76,576
122,600 (f)
(122,600)(f)
--------
Net Income .............................. $ 576,475 $ 360,587 ($ 168,679) $ 768,383
============ ============ ============ ============
Net income per common share ..... $ 0.04 $ 0.72 $ 0.05
============ ============ ============
Average number of common
shares outstanding .................. 14,822,366 500,000 16,383,919
========== ======= ==========
<FN>
NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
(a) to provide for amortization on excess purchase price over net assets
acquired based on an estimated life of 20 years.
(b) to recognize interest expense on debt to be issued in connection with the
acquisition.
(c) to reflect reduction of interest expense due to a refinancing of the debt
of Cataract, Inc. from 15% to 9% per annum.
(d) to reduce interest income on internal funds used for cash consideration.
(e) to record income tax effect of interest expense, interest income and
amortization adjustments at an effective rate of 12% net of utilization of
RCM Technologies, Inc. Federal Net Operating Loss Carryfoward (N.O.L.).
(f) to provide Federal Income taxes on Cataract, Inc. (an S-Corp. for federal
purposes) and utilization of RCM's Federal N.O.L.
</FN>
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(Registrant)
RCM Technologies, Inc.
By: /S/ Stanton Remer
---------------------
Stanton Remer
Chief Financial Officer,
Treasurer and Director
Date: September 12, 1995
\PHILA2\63461_6
MERGER AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
CI ACQUISITION CORP.
AND
CATARACT, INC.
<PAGE>
\PHILA2\63461_6
TABLE OF CONTENTS
Page
1. RECITALS AND DEFINITIONS............................................ 1
2. MERGER AND MERGER CONSIDERATION..................................... 3
2.1 The Merger..................................................... ... 3
2.2 Merger Consideration............................................... 5
3. DELIVERY OF ACQUIREE SHARES......................................... 5
4. REPRESENTATIONS AND WARRANTIES OF ACQUIREE
AND ACQUIREE SHAREHOLDERS.............................................. 6
5. REPRESENTATIONS AND WARRANTIES OF RCM AND ACQUIR0R................. 16
6. COVENANTS OF THE PARTIES TO THIS AGREEMENT......................... 18
7. CLOSING DATE..................................................... . 26
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE
AND ACQUIREE SHAREHOLDERS............................................. 26
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM
AND ACQUIROR. ........................................................ 27
10. CONDITIONS SUBSEQUENT............................................. 30
11. INDEMNIFICATION................................................... 34
12. DOCUMENTS AT CLOSING.............................................. 37
13. TERMINATION.........................................................39
14. NOTICES.............................................................40
15. MISCELLANEOUS.......................................................42
<PAGE>
\PHILA2\63461_6
LIST OF SCHEDULES
4(b) Financial Statements
4(d) Accounts Receivable of Acquiree as of July 31, 1995
4(e) Material adverse changes
4(f) Litigation
4(h) Articles of Incorporation, Bylaws and Contracts of Acquiree
4(i) Tax information
4(j) All material Contracts and Agreements
4(k) Liens, encumbrances and general description of all real property in
which Acquiree has an ownership interest
4(l) Licenses, trademarks and trade names
4(m) Consents
4(u) Number of employees, names and addresses and total compensation of all
directors and officers of Acquiree - identifies all employee benefit
plans
4(v) Compliance with environmental and conservative laws
4(y) List of all insurance policies
4(z) List of all bank accounts maintained or for the benefit of Acquiree
4(aa) List of 10 largest customers of Acquiree, based on dollar volume of
income as of October 2, 1994
4(ab) Prepayment penalties
5(a) Articles of Incorporation and Bylaws of Acquiror
5(b) Articles of Incorporation and Bylaws of RCM
5(d) Subsidiaries of Acquiror
<PAGE>
\PHILA2\63461_6
LIST OF EXHIBITS
Exhibit "A" Articles of Merger
Exhibit "B" Registration Rights Agreement
Exhibit "C" Voting Trust Agreement
Exhibit "D" Investor Representation Letter
Exhibit "E" Stock Pledge Agreement
<PAGE>
\PHILA2\63461_6
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and entered into as of
this 31st day of July 1995, by and among RCM Technologies, Inc., a
Nevada corporation ("RCM"); CI Acquisition Corp., a Pennsylvania corporation
(the "Acquiror"); Cataract, Inc., a Pennsylvania corporation (the "Acquiree");
and those shareholders of Acquiree identified at paragraph 1 below (the
"Acquiree Shareholders").
RECITALS:
A. The Acquiree Shareholders together own 100% of the issued and
outstanding shares of common stock of the Acquiree (the "Acquiree Shares").
The Acquiree Shares constitute all of the issued and outstanding capital stock
of the Acquiree.
B. RCM owns 100% of the issued and outstanding shares of common stock
of the Acquiror.
C. The Directors of RCM, Acquiror and the Acquiree believe that the
merger of the Acquiree with and into the Acquiror would be advantageous and
beneficial to the respective shareholders, employees, and customers of those
companies.
D. It is the intention of the parties hereto that: (i) the Acquiree
shall be merged with and into the Acquiror in exchange for certain cash
consideration and the issuance to the Acquiree Shareholders of shares of RCM's
authorized but unissued common stock to the extent and in the manner set forth
below (the "Merger"); and (ii) the issuance of stock in connection with the
Merger shall qualify as a transaction exempt from registration or
qualification under the Securities Act of 1933, as amended, and under the
applicable securities laws of the states or jurisdictions where the Acquiree
Shareholders reside.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Recitals and 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 - Cataract, Inc., a Pennsylvania corporation
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Acquiree Shareholders - Joseph A. Marubbio, Paula Marubbio, Robert L.
Starer, Merle A. Starer, James R. Affleck, Jr., Sarah B. Affleck and those
other [entities][individuals] that may become a shareholder, and a party to
this Agreement, as a result of the exercise of the Prudential Options
Acquiror - CI Acquisition Corp., a Pennsylvania corporation
Agreement - shall mean this Merger Agreement.
Code - the Internal Revenue Code of 1986, as amended
Closing - the transaction of events set forth in Section
12 hereof
Closing Date - the day on which the Closing is to be held as
set forth in Section 7 hereof
Exchange Act - the Securities Exchange Act of 1934, as amended
Financial Statements - audited financial statements of Cataract, Inc., a
Delaware corporation, for the fiscal year ended September 30, 1992 and the
eight-month period ended May 31, 1993 and audited financial statements of
the Acquiree for the four months ended September 30, 1993 and combined with
the eight months ended May 31, 1993, a financial statement for the twelve
months ended September 30, 1993 and fiscal year ended September 30, 1994
and the interim (unaudited) financial statements for July 2, 1995, all in
such form as is acceptable to RCM to comply with its filing obligations to
the SEC
Merger - the merger of the Acquiree with and into the
Acquiror
Merger Consideration - the Merger Shares and cash consideration to be
received by the Acquiree Shareholders pursuant to the Merger
Merger Shares - shares of RCM Common Stock to be issued to the
Acquiree Shareholders pursuant to the terms of this Merger Agreement
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Permitted Dividends - "Subchapter S" dividends representing earnings
of the Acquiree on which the Acquiree Shareholders have been or will be
subject to individual taxation, but which have not otherwise been withdrawn
from or paid by the Acquiree.
Prudential Options - those stock purchase options issued as of May 5,
1993 by the Acquiree (under its previous name, "Ente, Inc.") to Prudential
Leveraged Asset Trust - 1990A and to Saint Peters College Leveraged Asset
Trust - 1989A, providing for the issuance of an amount of stock equal to no
more than 15% of the common stock of the Acquiree in the aggregate
RCM - RCM Technologies, Inc., a Nevada corporation RCM Common Stock -
common stock, $.05 par value per share, of RCM
RCM Statements - RCM's consolidated financial statements (audited) for
the fiscal years ended October 31, 1994, 1993 and 1992, and (unaudited) for
the six months ended April 30, 1995
SEC - the Securities and Exchange Commission Securities Act - the
Securities Act of 1933, as amended 2. Merger and Merger Consideration.
2.1 The Merger
(a) Upon the terms and conditions of this Agreement, on the Closing
Date (as defined herein), Acquiree shall be merged with and into Acquiror
in accordance with the provisions of the Pennsylvania Business Corporation
Law of 1988 (the "PBCL") and the separate corporate existence of Acquiree
shall cease, and the Acquiror shall continue as the surviving corporation
under the laws of the Commonwealth of Pennsylvania with the corporate name,
"CATARACT, INC.".
(b) The Merger shall become effective upon the filing of the articles
of merger, substantially in the form of Exhibit A, attached hereto and made
a part hereof (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Pennsylvania in accordance with Section 1928 of the PBCL.
The Articles of Merger shall be filed by the appropriate parties
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thereto on the Closing Date. The date and time when the Merger shall
become effective is referred to herein, in accordance with Section 7
hereof, as the "Closing Date."
(c) On the Closing Date:
(i) Acquiror shall continue its existence under the laws of the
Commonwealth of Pennsylvania as the surviving corporation;
(ii) the separate corporate existence of Acquiree shall cease;
(iii) all rights, title and interests to all real estate and other
property owned by Acquiree shall be allocated to and vested in Acquiror as
the surviving corporation without reversion or impairment, without further
act or deed, and without any transfer or assignment having occurred, but
subject to any existing liens or other encumbrances thereon, and all
liabilities and obligations of Acquiree shall be allocated to Acquiror as
the surviving corporation which shall be the primary obligor therefor and,
except as otherwise provided by law or contract, no other party to the
Merger, other than Acquiror as the surviving corporation, shall be liable
therefor;
(iv) the Articles of Incorporation of Acquiror as in effect
immediately prior to the consummation of the Merger, other than the name of
Acquiror which shall be changed to "CATARACT, INC." in connection with the
Merger, shall be the Articles of Incorporation of the surviving
corporation, until thereafter amended as provided by law and such Articles
of Incorporation;
(v) Each of Acquiree, the Acquiree Shareholders, Acquiror and RCM
shall execute and deliver, and file or caused to be filed with the
Secretary of State of the Commonwealth of Pennsylvania the Articles of
Merger, with such amendments thereto as the parties hereto shall deem
mutually acceptable.
(vi) the Bylaws of Acquiror, as in effect immediately prior to the
consummation of the Merger, shall be the Bylaws of the Acquiror as the
surviving corporation until thereafter amended as provided by law and such
Bylaws; and
(vii) the officers and directors of the Acquiror as the surviving
corporation shall continue to hold office until their respective successors
shall have been elected or appointed in accordance with the Bylaws of the
Acquiror as the surviving corporation or until they shall have sooner been
removed or shall have resigned in accordance with such Bylaws.
2.2 Merger Consideration
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(a) On the Closing Date, upon tendering to the Acquiror a certificate
or certificates representing the Acquiree Shares, and after having taken or
caused to be taken all other actions otherwise required in this Agreement
to effectuate a closing hereunder, the Acquiree Shareholders thereof shall
be entitled to receive immediately therefor, and RCM shall cause to be
issued or paid, as the case may be: (i) certificates in the name of each of
the Acquiree Shareholders representing, in the aggregate, the number of
Merger Shares which as of the Closing Date have an aggregate valuation
equal to One Million Two Hundred Thousand Dollars, ($1,200,000), (for this
purpose, the "valuation" of the Merger Shares shall be determined based
upon the average of the closing bid prices of the RCM Common Stock for the
thirty (30) calendar day period immediately preceding the Closing Date);
and (ii) the sum of Two Million Dollars ($2,000,000) in immediately
available funds. The consideration received pursuant to this subparagraph
(a) of this Section 2.2 shall be collectively referred to as the "Merger
Consideration." (b) The Merger Consideration received by the Acquiree
Shareholders shall be divided among them in the same proportion as they own
the Acquiree Shares. No other consideration shall be payable to the
Acquiree Shareholders in connection with the Merger.
3. Delivery of Acquiree Shares. On the Closing Date, the Acquiree
Shareholders will deliver to the Acquiror for cancellation the certificates
representing all of the Acquiree Shares, duly endorsed (or with duly
executed stock powers) so as to transfer all of the Acquiree Shares to the
Acquiror, free and clear of all liens, claims and encumbrances. The Merger
shall not be effected unless certificates representing all of the Acquiree
Shares are delivered to the Acquiror on the Closing Date, free and clear of
all liens, claims and encumbrances.
4. Representations and Warranties of Acquiree and Acquiree
Shareholders. As a material inducement to RCM and the Acquiror to enter
into this Agreement and consummate the transactions contemplated hereby,
the Acquiree Shareholders do hereby jointly and severally, and the Acquiree
does hereby make the following representations and warranties to RCM and
Acquiror. The 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.
(a) 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 now own, or at the Closing Date will own, more than
5% percent of the issued and outstanding capital stock of any other
corporation or an equity interest in any other entity.
(b) Financial Statements. The Financial Statements have been attached
as Schedule [4(b)]. The Financial Statements shall be in a form
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prepared in all material respects in compliance with the requirements
of Regulation S-X promulgated by the SEC under the Exchange Act.
(i) The Financial Statements and financial information contained
therein will present fairly the financial condition of the Acquiree for the
periods covered (subject, in the case of unaudited statements, to normal
year-end audit adjustments which will not be material to the Acquiree,
taken as a whole, in amount or effect). The Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied. The books and records of the Acquiree, financial and
other, are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(c) Undisclosed Liabilities. The Acquiree does not have any material
liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, that are not reflected or otherwise provided for in the
Financial Statements to the extent such liabilities or obligations are
otherwise required to be reflected by generally accepted accounting
principles, except for liabilities and obligations arising subsequent to
the date of the Financial Statements 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 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.
(d) Accounts Receivable. Attached hereto as Schedule 4(d) is a list of
all accounts receivable of Acquiree as of July 2, 1995 and aging schedule
pertaining thereto. All of the accounts receivable of Acquiree as of
July 2, 1995 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 are not
uncollectible or subject to offset or counterclaim or otherwise in
controversy.
(e) Materially Adverse Change. Except as set forth in Schedule [4(e)],
or as otherwise specifically stated in this Agreement, since the date of
their financial statements as of, and for the period ended, October 2,
1994, or later stub-period financial statements, if provided, the business
of the Acquiree has been operated in the ordinary course and there has not
been:
(i) Any materially adverse change in the business, condition
(financial or otherwise), results of operations, prospects, properties,
assets, liabilities, earnings or net worth of the Acquiree for such period
(other than as a result of Permitted Dividends) or at any time during such
period;
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(ii) Any material damage, destruction or loss (whether or not covered
by insurance) affecting the Acquiree or its assets, properties or business;
(iii) Any declaration, setting aside or payment of any dividend or
other distribution in respect of any shares of the capital stock of the
Acquiree, or any direct or indirect redemption, purchase or other
acquisition of any such stock or any agreement to do so, except for
Permitted Dividends;
(iv) Any issuance or sale by the Acquiree, or agreement by the
Acquiree, or any of the Acquiree Shareholders, to sell or pledge any of the
Acquiree's securities, nor have any irrevocable proxies been given with
respect to the Acquiree's securities, except in connection with pledges
securing obligations to be repaid from the cash portion of the Merger
Consideration concurrently with the Closing of the Merger;
(v) Any cancellation, breaches or cost over-runs on any existing
contract of which Acquiree is a party;
(vi) Any statute, rule, regulation or order adopted by any
governmental body, agency or authority (including orders of regulatory
authorities with jurisdiction over the Acquiree) that materially and
adversely affects the Acquiree or its business or financial condition;
(vii) Any material increase in the rate or terms of compensation
(including bonus 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
(viii) Any other events or conditions of any character that may
reasonably be expected to have a materially adverse effect on the Acquiree
or its business or financial condition.
(f) Litigation. Except as set forth in Schedule 4(e), there are no
actions, suits, claims, investigations or legal, administrative or
arbitration proceedings pending or, to the knowledge of the Acquiree or any
of the Acquiree Shareholders, 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.
(g) 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
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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, except as to any licenses and permits, the absence
of which would not have a materially adverse effect upon the financial
condition of the Acquiree. Neither the Acquiree nor the Acquiree
Shareholders knows of any violations of any such licenses or permits. No
proceedings are pending or threatened to revoke or limit the use of such
licenses or permits.
(h) Due Organization. The Acquiree is a corporation duly organized,
validly existing and subsisting under the laws of the Commonwealth of
Pennsylvania; its status is active; 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 and
where failure to so qualify would 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 have been attached as
Schedule [4(h)].
(i) Taxes. Except as disclosed on Schedule [4(i)] all (i) 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 in all
material respects; (ii) 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 Financial Statement; and (iii) federal, state, local and
foreign withholdings required with respect to the business of Acquiree have
been withheld and timely paid over to the appropriate governmental
authority. Schedule [4(i)] sets forth for each subsequent taxable year the
current status of any examination being conducted by the Internal Revenue
Service or any other taxing authority relating to Acquiree. Notwithstanding
the foregoing, no representation or warranty is made with respect to
Acquiree's entitlement to any claimed tax refund or the amount of any
claimed tax refund which Acquiree may ultimately receive. Except as
disclosed on Schedule [4(i)], 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, except as scheduled.
(j) Agreements. Schedule [4(j)] contains a true and complete list and
brief description of all material written or oral contracts, agreements,
mortgages, obligations, understandings, arrangements, restrictions and
other instruments to 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 [4(j)] have been or will have been made available to the
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Acquiror prior to the date hereof. No event has occurred that (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default by the Acquiree under any
of the contracts or agreements set forth in Schedule [4(j)]. Neither the
Acquiree nor any of the Acquiree Shareholders have knowledge of any
material default by the other parties to such contracts or agreements. In
addition, no material violations have occurred pursuant to any loan
agreements to which the Acquiree is a party.
(k) 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 [4(k)], and
(ii) liens for current taxes and other liens arising by operation of law to
secure obligations that are not yet delinquent. Schedule [4(k)] also
contains a general description of all real property in which Acquiree has
an ownership interest. Except as set forth in said Schedule [4(k)] 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.
(l) Licenses; Trademarks: Trade Names. Except as set forth on Schedule
[4(l)], the Acquiree does not have nor does it own any licenses,
trademarks, trade names, service marks, copyrights, patents or any
applications for any of the foregoing that relate to its business.
(m) 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, understanding,
arrangement or restriction of any kind to which the Acquiree is a party or
by which the Acquiree or its 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 [4(m)] will be
required as to the Merger pursuant to the terms of those scheduled
agreements. No consent or approval
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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.
(n) Capitalization. The authorized capitalization of the Acquiree
consists of 1,000,000 shares of no-par value Common Stock of which 500,000
shares are issued and outstanding as of the date of this Agreement. All
outstanding securities have been duly authorized, validly issued, and are
fully paid and non-assessable, and all such securities were issued in
compliance with applicable federal and state securities laws and
regulations. 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, except for the Prudential Options which, if exercised, will
change the amount of issued shares of the stock of Acquiree and upon which
exercise the Acquiree will cause the holder(s) of the exercised Prudential
Options to become additional Acquiree Shareholders hereunder.
(o) Full Disclosure. The Acquiree has, and at the Closing Date will
have, disclosed to the Acquiror in the Schedules to this Agreement or
independently, or made available to the Acquiror, documents, books and
records pertaining to, all events, conditions and facts materially
affecting the properties, business and prospects of the Acquiree that are
known to the Acquiree and the Acquiree Shareholders. The Acquiree has not
and will not have, at the Closing Date, withheld disclosure or availability
of any events, conditions and facts of which it may have knowledge and that
may materially and adversely affect the properties, business or prospects
of the Acquiree.
(p) Brokerage Fees. 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.
(q) Share Ownership. The Acquiree Shares to be surrendered in the
Merger will be owned of record and beneficially, by the Acquiree
Shareholders, free and clear of all liens and encumbrances of any kind and
nature, and have not been sold, pledged, assigned or otherwise transferred.
There are no agreements (other than this Agreement) to sell, pledge, assign
or otherwise transfer such securities.
(r) Acquiree Shareholders' Obligation. This Agreement constitutes the
valid and legally binding obligation of the Acquiree Shareholders. Neither
the execution 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 Acquiree Shareholders or any contract, commitment, agreement or
restriction of any kind to which any of the Acquiree Shareholders are a
party or by which any of the Acquiree Shareholders are bound. The execution
and delivery of this Agreement does not, and the consummation of the
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transactions described herein will not, violate in any material
respect applicable law, or any mortgage, lien, agreement, indenture, lease
or understanding (whether oral or written) of any kind outstanding relative
to the Acquiree Shareholders, except for pledges that will be satisfied
concurrently with the Closing of the Merger.
(s) Acknowledgment of Dissenters Rights. Acquiree Shareholders
acknowledge that dissenters rights are available to them under Subchapter D
of Chapter 15 of the Pennsylvania Business Corporation Law, however, by
virtue of their signature to this Merger Agreement do hereby acknowledge
their agreement to forego all such dissenters rights and accept in lieu
thereof the Merger Consideration set forth within this Agreement.
Accordingly, such Acquiree Shareholders will not have an opportunity to
dissent from the actions taken by the Board of Directors of Acquiree or
from the transactions contemplated by this Agreement.
(t) 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 the Acquiree Shareholders of
this Agreement or the consummation of the transactions described herein,
except to the extent that any of the Acquiree 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 and the satisfaction of existing
secured creditors of the Acquiree.
(u) Employee; Benefit Plans.
(i) Schedule [4(u)] sets forth the number of employees, a list of the
names, addresses and total compensation of all directors and officers of
Acquiree and each employee of Acquiree.
(ii) Schedule [4(u)] identifies all "employee benefit plans" (as such
term is defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("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 Acquiree.
Except as disclosed on Schedule [4(u)], each such plan or program has been
operated substantially in accordance with its terms and, to the extent
applicable, ERISA and the Internal Revenue Code of 1986, as amended (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.
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(iii) Except as disclosed on Schedule [4(u)], 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.
(iv) Except as disclosed on Schedule [4(u)], 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.
(v) 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.
(v) Environmental Matters. Except as set forth in Schedule [4(v)]
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), the violation
of which would have a materially adverse effect on the financial condition
of the Acquiree, 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"), the violation of which would have a
materially adverse effect on the financial condition of the Acquiree.
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.
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(w) Not Investment Company. The Acquiree is not an "investment
company" as defined in Section 368(a)(2)(F)(iii) of the Code, nor is it an
investment company under the Investment Company Act of 1940.
(x) Acquiree Documents. All documents relating to the Acquiree and its
business that have been previously delivered to RCM in connection with the
Merger and this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required or necessary to be
stated therein to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(y) Insurance. Schedule [4(y)] contains a list of such policies
relating to liability, environmental, crime, fidelity, life, fire, workers'
compensation, health, director and officer liability and all other forms of
insurance currently 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 [4(y)] are
outstanding and in full force and effect and all premiums with respect to
such policies are currently paid.
(z) Bank Accounts. Schedule [4(z)] contains a list of all bank
accounts maintained by, or for the benefit of, Acquiree.
(aa) Customers. Set forth on Schedule [4(aa)] is a list of the ten
(10) largest customers of Acquiree based on the dollar volume of income
generated by that customer for the fiscal year ended October 2, 1994 and as
of July 2, 1995. No such customer has terminated or is presently
threatening to terminate its relationship with Acquiree.
(bb) Prepayment Penalties. Except as disclosed on Schedule [4(ab)],
which reflects a prepayment penalty of twenty-five thousand dollars
($25,000), 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, RCM and Acquiror shall be liable for
the payment of such penalties or fines in any amount not to exceed an
amount equal to twenty thousand dollars ($20,000). If such penalty or fine
is greater than twenty thousand dollars, then Acquiree Shareholders shall
be liable for the amount of penalty or fine which exceeds twenty thousand
dollars.
(cc) Blue Sky Filings. Acquiree Shareholders acknowledge and agree to
the following:
(i) Each Acquiree Shareholder who is a pennsylvania resident has the
right to cancel and withdraw from this Merger Agreement upon written notice
to RCM within two business days of the execution of the Merger Agreement.
Any notice of cancellation or withdrawal should be made by telegram or
certified or registered mail and will be effective upon delivery to Western
Union or deposit in the United States mails, postage or other
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transmittal fees paid. Upon such cancellation or withdrawal, the
Acquiree Shareholder will have no obligation or duty under the Merger
Agreement; and
(ii) No Acquiree Shareholder who is a Pennsylvania resident may sell
or transfer their Merger Shares for twelve months from the Closing Date, as
such sale or transfer would violate Section 203(d) of the Pennsylvania
Securities Act of 1972 and the regulations thereunder.
(dd) Approval. The Board of Directors of the Acquiree and the Acquiree
Shareholders shall have approved the execution of this Agreement and the
Merger thereby.
5. Representations and Warranties of RCM and Acquiror. RCM and the
Acquiror, as a material inducement to the Acquiree and the Acquiree
Shareholders to enter into this Agreement and consummate the transactions
contemplated hereby, do hereby jointly and severally make the following
representations and warranties to the Acquiree and the Acquiree
Shareholders, 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.
(a) Due Organization of Acquiror. The Acquiror is a corporation duly
organized, validly existing and subsisting under the laws of the
Commonwealth of Pennsylvania, is qualified to do business and in good
standing in each state where the properties owned, leased or operated, or
the business conducted, by it require such qualification and where failure
to so qualify would have a material adverse effect on the financial
condition, properties, business or results of operations of the Acquiror.
The Acquiror has the corporate power to own its property and to carry on
its business as now presently conducted. The Articles of Incorporation and
By-Laws of the Acquiror are attached hereto as Schedule [5(a)] and are made
a part hereof.
(b) 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 and where failure to so qualify would have a
material adverse effect on the financial condition, properties, business or
results of operations of RCM. RCM has the corporate power to own its
property and to carry on its business as now presently conducted. The
Articles of Incorporation and By-Laws of RCM are attached hereto as
Schedule [5(b)] and are made a part hereof.
(c) 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 14,713,565 shares were outstanding on the date of
this Agreement; and. All of the outstanding shares of RCM Common Stock have
been validly issued and are fully paid and nonassessable. As of the date of
this Agreement, RCM had 786,709 Class C Warrants currently issued and
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outstanding. The Class C Warrants entitle the holders to purchase
786,709 shares of RCM Common Stock.
(d) Subsidiaries. Except as set forth upon Schedule [5(d)], the
Acquiror 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.
(e) Due Authorization. This Agreement has been duly authorized,
executed, and delivered by the Acquiror and RCM, and constitutes a legal,
valid, and binding obligation of the Acquiror and 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. The execution,
delivery and performance of this Agreement by the Acquiror and RCM will not
violate or conflict with in any material respect or constitute a default
under any provisions of applicable law, the Acquiror's or RCM's Articles of
Incorporation or Bylaws, or any agreement or instrument to which the
Acquiror or RCM is a party or by which it or its assets are bound. No
consent of any federal, state, municipal or other governmental authority is
required by Acquiror or RCM for the execution, delivery or performance of
this Agreement by the Acquiror and RCM. No consent of any party to any
contract or agreement to which the Acquiror is a party or by which any of
its property or assets are subject is required for the execution, delivery
or performance of this Agreement by the Acquiror that has not been obtained
at the date of this Agreement.
(f) Merger Shares. The Merger Shares to be delivered to the Acquiree
Shareholders will, when issued, 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.
(g) Brokerage Fees. RCM and Acquiror have not incurred, and will not
incur, any liability for brokerage or finder's fees or similar charges in
connection with this Agreement.
(h) 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 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.
(i) SEC Reports. RCM has heretofore delivered to Acquiree a copy of
its most recent reports filed with the SEC, including its Annual Report on
Form 10-K for the fiscal year ended October 31, 1994 and the
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quarterly report on Form 10-Q for the period ended April 30, 1995
(collectively, the "RCM Reports"). As of their respective dates neither of
the RCM Reports contained any untrue statements of a material fact or
omitted 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 dates
thereof. The RCM Reports have been prepared in material 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 represent fairly
the financial condition of RCM as of the date and for the periods covered
thereby.
6. Covenants of the Parties to this Agreement.
(a) Disclosure Documents.
(i) Each of RCM and Acquiror shall supply to Acquiree the necessary
information in writing, or cause the necessary information to be supplied
in writing, relating to RCM and Acquiror 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.
(ii) 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 agency in connection with the transactions
contemplated by this Agreement, with the cost of obtaining any such
information from third parties to be paid upon the Closing Date by Acquiror
or RCM.
(b) 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 [13], 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.
(c) Confidentiality.
(i) Confidentiality of RCM-Related Information. With respect to
information concerning RCM or Acquiror that is made available to Acquiree
or Acquiree Shareholders pursuant to the provisions of Section
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[6(b)], 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 Merger and related
transactions and shall not disseminate or disclose any of such information
other than to their directors, officers, employees, shareholders,
affiliates, agents, lenders and representatives who need to know such
information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Acquiree of the
confidential nature of such information, the prohibition under federal
securities laws of trading upon any material non-public information and
directed by Acquiree in writing to treat such information confidentially.
If this Agreement is terminated pursuant to the provisions of Section [13],
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) becomes 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 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 (i);
(ii) Confidentiality of Acquiree-Related Information. With respect to
information concerning Acquiree that is made available to RCM or Acquiror
pursuant to the provisions of Section [6(b)], RCM and Acquiror jointly and
severally agree that they shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating
the Merger and the related transactions and shall not disseminate or
disclose any of such information other than to their directors, officers,
employees, shareholders, affiliates, agents, lenders and representatives
who need to know such information for the sole purpose of evaluating the
Merger and the related transactions (each of whom shall be informed in
writing by RCM or Acquiror, as appropriate, of the confidential nature of
such information and directed by such party in writing to treat such
information confidentially). If this Agreement is terminated pursuant to
the provisions of Section [13], RCM and Acquiror jointly and severally
agree to return immediately all such information, all copies thereof and
all information prepared by either of them 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 or Acquiror from a third party entitled to disclose it; (ii)
becomes known publicly other than through
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\PHILA2\63461_6
RCM or Acquiror or any party who received the same through either of
them; (iii) is required by law or court order to be disclosed by RCM or
Acquiror; or (iv) is disclosed with the express prior written consent
thereto of Acquiree. RCM and Acquiror jointly and severally agree 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 (ii).
(iii) Nondisclosure. Neither RCM, Acquiror, 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 Merger, to any party whose consent is
required in connection with the Merger or this Agreement; or to any
regulatory body where such disclosure is required under federal or state
law.
(d) Consents. RCM, Acquiror 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.
(e) Filings. RCM, Acquiror and Acquiree shall, as promptly as
practicable, make any required filings, and RCM, Acquiror and Acquiree
shall promptly make any other required submissions, under any law, statute,
order rule or regulation with respect to the Merger and the related
transactions and shall cooperate with each other with respect to the
foregoing.
(f) 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 Merger and the other transactions
contemplated by this Agreement.
(g) Notification of Certain Matters. Acquiree shall give prompt notice
to RCM, and RCM and Acquiror 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
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\PHILA2\63461_6
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 or Acquiror, 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.
(h) Expenses. Except as otherwise expressly provided herein, all costs
and expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated.
(i) 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 in connection with, or that relate to the Merger, and the cost
of any such consents shall be paid by Acquiror.
(j) Loss of "S" Corporation Status. Upon completion of the Merger 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.
(k) Registration Rights. On or prior to the Closing Date, Acquiree
Shareholders shall execute a Registration Rights Agreement substantially in
form and substance similar to that attached hereto and made a part hereof
as Exhibit "B".
(l) Voting Trust. On or prior to the Closing Date, the Acquiree
Shareholders shall execute a Voting Trust Agreement substantially in form
and substance similar to that attached hereto and made a part hereof as
Exhibit "C".
(m) Investor Representation Letter. On or prior to the Closing Date,
the Acquiree Shareholders shall execute an Investor Representation Letter
substantially in form and substance similar to that attached hereto and
made a part hereof as Exhibit "D".
(n) Pledge Agreement. On or prior to the Closing Date, Acquiree
Shareholders shall execute a Pledge Agreement substantially in form and
substance similar to that attached hereto and made a part hereof as Exhibit
"E".
(o) Schedules. The Acquiree shall have delivered all of the Schedules
required herein, and copies of the documents referred to therein, including
Exhibit "A", to RCM and Acquiror within five (5) days of the execution of
this Agreement, and such Schedules and documents shall have been
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\PHILA2\63461_6
reasonably acceptable to RCM and Acquiror.
(p) Officer's Certificate. On or prior to the Closing Date, Acquiree
shall deliver an officer's certificate to RCM and Acquiror to the effect
that all of the representations and warranties contained in this Agreement
are true and complete in all respects as of the Closing Date, and that the
Acquiree has complied in all material respects with its covenants and
agreements set forth herein required to be complied with by the Closing;
and there shall be delivered to RCM and Acquiror a certificate signed by
the Acquiree Shareholders to the effect that the representations and
warranties of the Acquiree Shareholders set forth herein are true and
correct in all material respects.
(q) Prudential Options. On or prior to the Closing Date, Acquiree and
Acquiree Shareholders shall have caused either (i) the termination of the
Prudential Options or (ii) the exercise of the Prudential Options and, in
that event, the resulting shareholders that exercised the Prudential
Options shall enter into an amendment to this Agreement whereby these
shareholders shall become Acquiree Shareholders and become bound by all of
the terms of this Agreement as though such shareholder had originally
executed this Agreement.
(r) Resignations. On or prior to the Closing Date, Acquiree and
Acquiree Shareholders shall take all actions necessary to secure and effect
the resignation of all of the current directors and officers of Acquiree.
(s) Interim Operations of Acquiree. During the period from the date of
this Agreement and continuing until the Closing Date, Acquiree agrees
(except as expressly contemplated by this Agreement, including any Exhibits
and Schedules hereto, or to the extent that RCM shall otherwise consent in
writing) that:
(i) Ordinary Course. Acquiree shall carry on its business 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 its present business
organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers and
others having business dealings with it;
(ii) Dividends; Changes in Stock. Acquiree shall not (a) declare or
pay any dividend, on, or make other distributions in respect of, any of its
capital stock, (b) split, combine or reclassify any of its capital stock or
issue, authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of capital stock of Acquiree
or (c) repurchase or otherwise acquire any shares of capital stock of
Acquiree.
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(iii) Issuance of Securities. Acquiree shall not sell, issue,
authorize or propose the sale or issuance of, or purchase or propose the
purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such
shares or other convertible securities, except pursuant to the Prudential
Options, to the extent they may be exercised.
(iv) Governing Documents. Acquiree shall not amend its Certificate of
Incorporation or its Bylaws.
(v) No Acquisition. Acquiree shall not acquire or agree to acquire by
merging or consolidation with, or by purchasing a substantial portion of
the assets or securities of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets that
are material, individual or in the aggregate, to Acquiree.
(vi) No Dispositions. Acquiree shall not sell, lease or otherwise
dispose of or agree to sell, lease or otherwise dispose of, any of its
assets that are material, individually or in the aggregate, to Acquiree,
except in the ordinary course of business consistent with prior practice.
(vii) Indebtedness. Acquiree shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of Acquiree or guarantee any debt securities of others than in
the ordinary course of business consistent with prior practice.
(viii) Benefit Plans, Etc. Acquiree shall not adopt or amend in any
material respect any collective bargaining agreement or employee benefit
plan.
(ix) Executive Compensation. Acquiree shall not grant to any executive
officer or key employee, any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer or key employee.
(x) Other Actions. Acquiree shall not enter into any agreement or
arrangement to do any of the foregoing. Acquiree shall not take any action,
or fail to take any action, that is reasonably likely to result in any of
the representations and warranties of Acquiree set forth in this
Agreement becoming untrue.
(xi) Maintenance of Certain Financial Covenants.
(A) The Acquiree shall maintain and remain in compliance with the
following financial covenants between the date hereof and through and upon
the Closing Date:
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(1) The total "accounts receivable" of Acquiree (defined as those bona
fide accounts receivable representing the sales prices of goods,
merchandise or services sold or performed by Acquiree in valid transactions
in the normal course of Acquiree's business; which accounts receivable are
not uncollectible or subject to offset or counterclaim or otherwise in
controversy and which accounts receivable are not unpaid for more than
ninety (90) days after the date of original invoice) shall at all times
remain not less than 117.5% of the total indebtedness of Acquiree exclusive
of accounts payable (trade);
(2) Acquiree shall maintain a "tangible net worth" (defined as the sum
of capital stock and additional paid-in-capital plus any retained earnings
[or minus any accumulated deficit] less the book value attributed to all
intangible assets) of no lower than ($65,000);
(3) Acquiree shall maintain "working capital" (defined as current
assets less current liabilities) of at least $760,000;
(4) The ratio of the Acquiree's current assets to its current
liabilities shall not be less than 1.25 to 1.
(b) For the purposes of subparagraph (a) above, unless the context
otherwise requires, 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 audited financial
statements of Acquiree.
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7. Closing Date. The closing ("Closing") of the Merger shall take
place (a) within thirty (30) days of the execution of this Agreement,
unless such Closing cannot be accomplished as a result of either (i)
Acquiror being unable to secure financing from its principal lender for a
reason a beyond Acquiror's control or (ii) in light of all reasonable
efforts by RCM and/or Acquiror the due diligence required under this
Agreement has not been completed, and in such event of either of the above,
the Closing shall be extended an additional thirty (30) days, (b) at the
offices of Clark, Ladner, Fortenbaugh & Young, 2005 Market Street, 22nd
Floor, Philadelphia, PA 19103, 10:00 a.m, local time within sixty days from
the date of the execution by all parties of this Agreement, or (c) at such
other time and place and on such other date as RCM, the Acquiror and
Acquiree or Acquiree Shareholders shall agree. The date of the Closing is
referred to herein as the "Closing Date."
8. 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:
(a) The Board of Directors of RCM and the Board of Directors and RCM
as sole shareholder of the Acquiror shall have approved the execution of
this Agreement and the Merger thereby.
(b) The representations and warranties made by or on behalf of the
Acquiror and 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 material
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.
(c) RCM and the Acquiror 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.
(d) RCM and the Acquiror 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.
(e) There shall be delivered to the Acquiree and the Acquiree
Shareholders an officer's certificate of RCM and the Acquiror to the effect
that all of the representations and warranties of RCM and the Acquiror set
forth herein are true and complete in all material respects as of the
Closing Date, and that RCM and the Acquiror have complied in all material
respects with their covenants and agreements set forth herein that are
required to be complied with by the Closing Date.
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(f) 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 Merger or the related
transactions.
(g) RCM and/or Acquiror and/or a lender to one or both of them shall
have confirmed to the satisfaction of the Acquiree and the Acquiree
Shareholders that funds are available to refinance in full the indebtedness
of the Acquiree now guaranteed by the Acquiree Shareholders, which
refinancing shall be accomplished on the Closing Date.
(h) Trading in the stock of RCM shall not have been suspended for any
reason other than suspension of a market generally, and no materially
adverse change, other than as otherwise disclosed in the RCM Reports, shall
have occurred in the financial condition, operations or prospects of RCM or
Acquiror after the date hereof, but prior to the Closing Date.
9. Conditions Precedent to Obligations of RCM and Acquiror. All
obligations of RCM and Acquiror, which obligations shall be undertaken in
good faith, 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 or Acquiror:
(a) The Board of Directors of the Acquiree and the Acquiree
Shareholders shall have approved the execution of this Agreement and the
Merger thereby.
(b) The representations and warranties by the Acquiree and the
Acquiree Shareholders contained in this Agreement or in any certificate or
document delivered to RCM and Acquiror 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.
(c) 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 upon the Closing Date.
(d) The Acquiree shall have delivered all of the Schedules required
herein, and copies of the documents referred to therein, to RCM and
Acquiror and such Schedules and documents shall have been reasonably
acceptable to RCM and Acquiror.
(e) There shall be delivered to RCM and Acquiror 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 respects as of the Closing Date, and that the Acquiree has complied in
all material respects with its covenants and agreements set forth herein
required
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\PHILA2\63461_6
to be complied with by the Closing; and there shall be delivered to
RCM and Acquiror a certificate signed by the Acquiree Shareholders to the
effect that the representations and warranties of the Acquiree Shareholders
set forth herein are true and correct in all material respects.
(f) RCM and Acquiror 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, and which review shall not produce information
which is either: (i) in conflict with prior representations of Acquiree
Shareholders or management of Acquiree; or (ii) is likely to present facts
which, management of Acquiror believes will have an adverse impact upon the
expected combined results of operations and financial statement data
relative to the Acquiror following the Merger.
(g) RCM shall have obtained the approval of its principal lender of
this Agreement and the Merger contemplated thereby and to provide
refinancing of the existing indebtedness and line of credit reflected
within the Financial Statements of Acquiree.
(h) Acquiror or RCM shall have entered into a lease on satisfactory
terms and conditions with respect to the facilities utilized in the
operations of Acquiree.
(i) On or before the Closing Date, Acquiree and Acquiree Shareholders
shall have caused either (i) the termination of the Prudential Options or
(ii) the exercise of the Prudential Options and, in that event, the
resulting shareholders that exercised the Prudential Options shall enter
into an amendment to this Agreement whereby these shareholders shall become
Acquiree Shareholders and be bound by all of the terms of this Agreement as
though such shareholder had originally executed this Agreement.
(j) Acquiree shall not have any "built-in gains" or other corporate
level tax from the termination of its "S"-Corporation status upon
completion of the Merger.
(k) Acquiree and Acquiree Shareholders shall take all actions
necessary to effect the resignation of all of the current directors and
officers of Acquiree and execute releases in form and substance reasonably
satisfactory to RCM.
(l) 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 under this Agreement, applicable
law or any applicable contract or agreement (other than as contemplated by
this Agreement) to complete the Merger shall have been secured, including,
without limitation that this Agreement shall have been approved by the
affirmative vote of the Acquiree Shareholders.
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(m) 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 Merger or the related
transactions.
(n) RCM shall be satisfied that the offer and issuance of the Merger
Shares is exempt from the registration provisions of the Securities Act and
similar provisions under applicable state securities laws; provided,
however, that RCM agrees to use its best efforts to cause such offer and
issuance to qualify for an exemption from such registration provisions.
(o) RCM and Acquiror shall have secured satisfactory releases on
behalf of Acquiree from and against any claims of each of the Acquiree
Shareholders relating to matters which arose prior to the Closing Date.
(p) Acquiree Shareholders shall execute a Registration Rights
Agreement substantially in form and substance similar to that attached
hereto and made a part hereof as Exhibit "B".
(q) Acquiree Shareholders shall execute a Voting Trust Agreement
substantially in form and substance similar to that attached hereto and
made a part hereof as Exhibit "C".
(s) Acquiree Shareholders shall execute a Pledge Agreement substantially
in form and substance similar to that attached hereto and made a part
hereof as Exhibit "E".
10. Conditions Subsequent.
10.1 Distribution of "Subchapter S" Dividends. Within 45 days after
the Closing Date, RCM, Acquiror and Acquiree Shareholders shall jointly
cooperate in connection with the preparation of financial statements which
reflect the results of operations of the Acquiree from the beginning of its
most recent fiscal year until the Closing Date. RCM, Acquiror and Acquiree
Shareholders acknowledge that the Acquiree Shareholders have heretofore
withdrawn from the Acquiree that amount representing earnings of the
Acquiree from the inception of its most recent fiscal year through a period
prior to the Closing Date. Within 10 days after the completion of the
aforesaid financial statements, RCM and/or Acquiror shall distribute to the
Acquiree Shareholders the "Subchapter S" dividends representing earnings of
the Acquiree from the inception of its most recent fiscal year through and
including the Closing Date upon which the Acquiree Shareholders have been
or will be subject to individual taxation, but which dividends were not
otherwise
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\PHILA2\63461_6
withdrawn from the business or paid by the Acquiree through the
Closing Date. To the extent that such financial statements reflect that the
Acquiree Shareholders have heretofore withdrawn an amount in excess of the
cumulative earnings of the Acquiree from the date of its most recent fiscal
year through the Closing Date, then any and all such amounts withdrawn in
excess of the earnings of the Acquiree shall be immediately repaid to the
Acquiror.
10.2 Obligation to Maintain Cumulative Gross Revenues Following the
Closing Date.
(a) The cumulative gross revenues of Acquiror (as the successor to the
business of Acquiree) for the period of the three consecutive years
following the Closing Date (the "Cumulative Gross Revenues") shall be at
least two hundred and seventy (270%) percent of those revenues realized by
the Acquiree during its fiscal year ended october 2, 1994 (the "Base Period
Revenues").
(b) RCM and the Acquiree Shareholders do hereby agree that it may be
difficult to accurately determine the actual amount of damages that RCM may
incur if Acquiror (as the successor to the business of Acquiree) fails to
achieve Cumulative Gross Revenues of at least two hundred and seventy
(270%) percent of the Base Period Revenues. Accordingly, it is agreed that
to the extent that the Cumulative Gross Revenues of the Acquiror (as the
successor to the business of Acquiree) are less than two hundred and
seventy (270%) percent of the Base Period Revenues, the Acquiree
Shareholders do hereby jointly and severally agree to pay to RCM without
demand, within forty- five (45) days of the third anniversary of the
Closing Date, liquidated damages in the following amounts.
Cumulative Gross Revenues Amount of
as Compared to Liquidated
Base Period Revenues: Damages :
255% - 269.9% . . . . . . . . . . .$ 300,000
240% - 254.9% . . . . . . . . . . .$ 600,000
225% - 239% . . . . . . . . . . . .$ 900,000
Less than 225% . . . . . . . . . .$1,200,000
It is further agreed to and acknowledged by the Acquiree
Shareholders that the amount of liquidated damages set forth above is
reasonable and not a punitive amount based upon the facts and
circumstances of the parties at the time of this Agreement.
(c) The liability to pay liquidated damages, as set forth at
subparagraph 10.2(b) above, shall be of recourse limited to the Merger
Shares pledged by the Acquiree Shareholders to RCM in the manner and
to the extent set forth within the Pledge Agreement attached hereto
and made a part hereof as Exhibit "E."
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(d) For the purposes hereof, the term "Cumulative Gross Revenues"
of Acquiror (as the successor to the business of Acquiree) shall in
all events include the sales receipts derived from or relating to the
operations of the business of Acquiror (as the successor to the
business of Acquiree) as such business is presently undertaken by
Acquiree by location, industry segment, product or service line and/or
customer base. In connection therewith, RCM and Acquiror will utilize
their best efforts following the Merger to preserve, protect, expand
and develop the historic business, customer base and goodwill of
Acquiree and covenants not to directly or indirectly employ any device
as a means by which to allocate revenue associated with the historic
business of Acquiree to any other affiliate or member of the
consolidated group for which RCM serves as a parent. The Acquiror
shall further provide to the Acquiree Shareholders, without demand,
financial reports detailing the calculation of Cumulative Gross
Revenues as used herein (i) for each of the Acquiror's fiscal quarters
ending after the Closing Date through and until the date three (3)
years after the Closing Date, such reports to be delivered to the
Acquiree Shareholders within forty-five (45) days after the end of
each applicable fiscal quarter and for each of the Acquiror's fiscal
years ending after the Closing Date through and until the date three
(3) years after the Closing Date, such reports to be delivered to the
Acquiree Shareholders within ninety (90) days after the end of each
applicable fiscal year. The Acquiror shall provide such additional
information to the Acquiree Shareholders as the Acquiree Shareholders
may reasonably request respecting the calculation of Cumulative Gross
Revenues as so reported and the efforts of RCM and Acquiror to comply
with their obligations under this Agreement.
10.3 Confidentiality. Acquiree Shareholders acknowledge and agree
that the operations, methods, customer list, trade secrets and other
confidential or proprietary information of Acquiree are valuable,
special and unique. Acquiree Shareholders further acknowledge that the
Acquiree's confidential trade and other proprietary information was
one of the principal assets being acquired by Acquiror pursuant to
this Merger. Acquiree Shareholders shall keep confidential any trade
secrets, confidential or proprietary information of Acquiree which are
now known to Acquiree Shareholders or which hereafter may become known
to Acquiree Shareholders and shall not at any time, directly or
indirectly, disclose any such information to any person, firm or
corporation other than Acquiree except to the extent that such
information is requested by a governmental entity, lawyer, accountant,
or other advisor on a need to know basis for arbitration, litigation
or pursuant to a court order. For purposes of this Section 10.3,
"trade secrets or other confidential or proprietary information" shall
mean information (i) which is unique to Acquiree or which has a
significant business purpose and is not known or available for sources
outside the Acquiree or from typical industry practice including, but
not limited to, customer information and client list of Acquiree, and
(ii) the disclosure of which would have a material adverse effect on
Acquiree (herein referred to collectively as the "Proprietary
Property"). Acquiree Shareholders shall have no right, title or
interest of any kind or nature in the Proprietary Property or any
proceeds thereof following the Closing except to the extent such
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\PHILA2\63461_6
information is necessary to assist Acquiree Shareholders in the
preparation of their tax returns as such returns include dividends
earned from Acquiror. The Proprietary Property shall thereafter remain
the sole and exclusive property of Acquiree. Notwithstanding anything
contained in this Section 10.3, no Acquiree Shareholder shall be
liable for a breach by another Acquiree Shareholder of this Section
10.3 after the Closing Date.
10.4 Restrictive Covenant. For the purposes of this Section 10.4,
"Business" shall mean the business operated by the Acquiree as of the
date of this Agreement. Except as specifically permitted elsewhere
herein, at any time during the five (5) year period following the
Closing Date (the "Restrictive Period"), no Acquiree Shareholder may
directly or indirectly: (i) own, manage, operate, control, be employed
by, participate in or be connected in any manner with the ownership,
management, operation or control of any business, person or entity
competitive with Acquiror's Business; (ii) without the expressed
written consent of Acquiror, act as an organizer, be employed by or
act as an independent contractor to any business, person or entity
involved in a business competitive with Acquiror's Business. Moreover,
during the Restrictive Period, no Acquiree Shareholder may contact,
directly or indirectly, or cause to be contacted directly or
indirectly, any client or customers of Acquiror for the purpose of
competitively soliciting business in competition with Acquiror's
Business. Acquiree Shareholders further agree that during the
Restrictive Period no Acquiree Shareholder will directly or indirectly
induce employees of Acquiror to either accept employment from, or to
engage in any activities with, a business that is in competition with
Acquiror. Notwithstanding the restrictions in this Section 10.4, the
activities and affiliation of Joseph Marubbio in connection with
Energy and Environmental Management Incorporated and National
Association of Drug Free Employees, a subchapter "S" corporation
("NADE"), Robert Starer's connection with NADE and James Affleck's
connection with NADE, as such activities and affiliations of Messrs.
Marubbio, Starer and Affleck are disclosed on Schedule 10.4, shall be
permitted under this Section. Additionally, notwithstanding anything
contained in this Section 10.4, no Acquiree Shareholder shall be
liable for a breach by another Acquiree Shareholder of this Section
10.4 after the Closing Date.
10.5 Remedies. Acknowledging that a breach of any provisions of
Sections 10.3 and 10.4 may cause substantial injury to Acquiror which
may be irrevocable and/or damages in an amount difficult or impossible
to ascertain, Acquiree Shareholders do hereby jointly and severally
agree that in the event that of the breach of any of the provisions of
Section 10.3 or 10.4 hereof, Acquiror shall have, in addition to all
other remedies (including but not limited to recovery of damages at
all costs and reasonable fees incurred by Acquiror) available in the
event of a breach of this Agreement, the right to injunctive or other
equitable relief. Acquiree Shareholders hereby waive the claim or
defense that the Acquiror has an adequate remedy at law for any such
breach of Sections 10.3 or 10.4 and covenant and agree that Acquiree
Shareholders will not assert such claim or defense in any action or
proceeding to enforce this provisions. The parties agree and
acknowledge that they are
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\PHILA2\63461_6
familiar with the present and proposed operations of
Acquiror and believe that the restrictive covenant set forth in
Section 10.4 is reasonable with respect to this subject matter,
duration and geographical application.
10.6 Severability. The parties expressly agree and
acknowledge that they are familiar with all of the terms and
conditions of this Agreement and believe, after consulting with
their respective attorneys, that the covenants set forth above
are reasonable. If, notwithstanding such agreement and
acknowledgement, a final, non-appealable judgment of a court of
competent jurisdiction determines that any such covenant is
unenforceable, then such covenant shall be reformed by reducing
the time period, geographical area, or both, to make the covenant
enforceable.
11. Indemnification.
(a) Acquiree Shareholders. Commencing from the execution of
this Agreement and continuing until the fourth annual anniversary
of the execution of this Agreement, Acquiree Shareholders (except
James R. Affleck, Jr. and Sarah B. Affleck (the "Afflecks"), who
shall not be liable under this Section 11 or under any other
provisions hereof, except to the extent of their Merger Shares
pledged under the Pledge Agreement) jointly and severally shall
indemnify, defend and hold harmless` RCM and Acquiror 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"), of which notice of such Claims must be
given to Acquiree Shareholders prior to the fourth year
anniversary of the execution of this Agreement, incurred by RCM
or Acquiror 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 deed, exhibit, closing
certificate, schedule or any ancillary certificates or 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 the Acquiree Shareholders,
excluding the Afflecks, arising from this Agreement, the Merger
or transactions related thereto shall be limited to the total
amount of Merger Consideration. Except with respect to Sections
4(ab), 10.2, 10.3 and 10.4, (for which the foregoing limitation
shall not apply), neither the Acquiree nor the Acquiree
Shareholders shall be liable to the Acquiror or to RCM under this
indemnity provision or otherwise under this Agreement or any
related document in connection with the Merger unless the Claim
or Claims outstanding against them exceed specified amounts as
described below:
(i) Upon the Closing Date and through and until the end of
the first annual anniversary of the Closing Date, RCM and/or
Acquiror shall be liable for any Claims, singularly or in the
aggregate equal an amount up to and including twenty-five
thousand dollars ($25,000) ("First Year Amount"). Any amount of
the Claims which exceed twenty-five thousand dollars ($25,000)
shall be the responsibility of Acquiree Shareholders;
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\PHILA2\63461_6
(ii) Upon the commencement of the second year following the
Closing Date, through and until the end of the second annual
anniversary of the Closing Date, RCM and/or Acquiror shall be
liable in an amount equal to any unused portion of the First Year
Amount, plus an additional twenty-five thousand dollars ($25,000)
(collectively, "Second Year Amount"). Any amount of the Claims
which exceed the Second Year Amount shall be the responsibility
of the Acquiree Shareholders;
(iii) Upon the commencement of the third year following the
Closing Date, through and until the end of the third annual
anniversary of the Closing Date, RCM and/or Acquiror shall be
liable in an amount equal to any unused portion of the Second
Year Amount plus an additional twenty-five thousand dollars
($25,000) (collectively, "Third Year Amount"). Any amount of the
Claims which exceed the Third Year Amount shall be the
responsibility of the Acquiree Shareholders;
(iv) Upon the commencement of the fourth year following the
Closing Date, through and until the end of the fourth annual
anniversary of the Closing Date, RCM and/or Acquiror shall be
liable in an amount equal to any unused portion of the Third Year
Amount plus an additional twenty-five thousand dollars ($25,000)
(collectively, "Fourth Year Amount"). Any amount of the Claims
which exceed the Fourth Year Amount shall be the responsibility
of the Acquiree Shareholders.
(b) RCM and Acquiror. RCM and Acquiror shall jointly and
severally indemnify, defend and hold harmless Acquiree and
Acquiree Shareholder 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 or Acquiror contained herein or in
any ancillary certificates or other documents or instruments
furnished by RCM or Acquiror pursuant hereto.
(c) Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted
as follows:
(i) 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 Notice"). The Indemnitor shall have thirty
(30) days (or, if shorter, a period to a date not less than ten
(10) days prior to when a responsive pleading or other document
is required to be filed but in no event less than ten (10) days
from delivery or mailing of the Claim Notice) (the "Notice
Period") to notify the Indemnitee (a) whether or not it disputes
the Claim and (b) if liability hereunder is not disputed, whether
or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate
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\PHILA2\63461_6
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.
(ii) Non-Third Party Claims. In the event that the
Indemnitee has or may 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, the liability of
the Indemnitor shall be determined under the rules of dispute
resolution and arbitration established at paragraph [14(o)]
hereafter.
12. Documents at Closing. Upon 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 the Acquiror and RCM the following:
(i) stock certificates for 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 the Acquiror 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 in all material respects as
of the Closing Date, as though originally given to Acquiror on
said date;
(iv) a certificate and such related schedules and financial
statements prepared and executed by the Chief Financial Officer
of
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\PHILA2\63461_6
Acquiree and executed by Acquiree Shareholders evidencing
compliance with the financial covenants set forth at paragraph
6(s)(xi) herein.
(v) a certificate of good standing for the Acquiree from the
Secretary of the Commonwealth of Pennsylvania, dated at or about
the Closing Date, to the effect that such corporation is in good
standing under the laws of such state;
(vi) an incumbency certificate for the Acquiree signed by
all of the officers thereof dated at or about the Closing Date;
(vii) 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;
(viii) certified resolutions from the Secretary of the
Acquiree dated at or about the Closing Date authorizing the
transactions contemplated under this Agreement;
(ix) resignations of all directors and executive officers,
including Robert Starer, Joseph Marubbio and James Affleck.
(x) the Registration Rights Agreement described in Exhibit
"B" signed by each of the Acquiree Shareholders;
(xi) the Voting Trust Agreement described in Exhibit "C",
signed by each of the Acquiree Shareholders and the voting
trustee;
(xii) the Investor Representation Letter described in
Exhibit "D" signed by each of the Acquiree Shareholders;
(xiii) the Pledge Agreement described in Exhibit "E" signed
by each of the Acquiree Shareholders;
(xiv) such documents as may be needed to accomplish the
Merger under the corporate laws of the states of incorporation of
the Acquiror and Acquiree;
(xv) 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; and
(xvi) an opinion of counsel in form and substance
satisfactory to RCM and the Acquiror.
(b) the Acquiror will deliver or cause to be delivered to
the Acquiree Shareholders:
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\PHILA2\63461_6
(i) cash or separate cashier's check drawn on a bank located
in Philadelphia, Pennsylvania in an aggregate amount equal to Two
Million Dollars ($2,000,000);
(ii) a certificate of the Acquiror's and RCM's President to
effect that all representations and warranties of the Acquiror
and 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) certificates from the Secretary of State of Nevada and
the Commonwealth of Pennsylvania dated at or about the Closing
Date that RCM and the Acquiror, respectively, are in good
standing under the laws of said states;
(iv) certified resolutions of the Secretary of the Acquiror
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) such documents as may be needed to accomplish the
Merger under the corporate laws of the states of incorporation of
the Acquiror and Acquiree;
(vii) the Articles of Merger to be filed with the Secretary
of State of the Commonwealth of Pennsylvania as required under
Section 1926 of the PBCL; and
(viii) 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) The Acquiror shall cause to be filed with the Secretary
of State of the Commonwealth of Pennsylvania, on the Closing Date
or as soon thereafter as practicable, an Amendment to the
Acquiror's Articles of Incorporation to change the name of the
Acquiror to "Cataract, Inc."
13. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing Date:
(a) by mutual written consent of the board of directors of
RCM, Acquiror and Acquiree;
(b) by any of RCM, Acquiror and Acquiree:
(i) if the Merger shall not have occurred by the Closing
Date unless such date is extended by the mutual written agreement
of RCM,
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\PHILA2\63461_6
Acquiror 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
12(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) by either of RCM or Acquiror upon a breach of this
Agreement by either Acquiree or Acquiree Shareholders, which
breach continues for ten (10) days after written notice thereof
is given to all parties, or by either of Acquiree or any Acquiree
Shareholder, upon a breach of this Agreement by either of RCM or
Acquiror, which breach continues for ten (10) days after written
notice thereof is given to all parties, in each case with
reservation of rights against the breaching party or parties for
indemnification for resulting damages as provided elsewhere
herein.
14. 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:
(a) If to the Acquiror or RCM, to:
Mr. Leon Kopyt
Chief Executive Officer
RCM Technologies, Inc.
2500 McClellan Avenue, Suite 350
Pennsauken, New Jersey 08109-4613
with a courtesy copy to;
Stephen M. Cohen, Esq.
Clark Ladner Fortenbaugh & Young
One Commerce Square
2005 Market Street
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 241-1800
Telecopy Number: (215) 241-1857
and
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\PHILA2\63461_6
Norman Berson, Esquire
Fineman & Bach, P.C.
1608 Walnut Street
Philadelphia, PA 19103
(b) If to the Acquiree Shareholders, to:
Robert L. Starer and Merle A. Starer
660 Newton-Yardley Road
Newtown, PA 18940
and
6555 Skyline Drive
Delray Beach, FL 33446
Joseph A. Marubbio and Paula Marubbio
12 North Road
Northport, NY 11768
James R. Affleck, Jr. and Sarah B. Affleck
948 Stony Lake
Gladwyne, PA 19035
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\PHILA2\63461_6
(c) If to the Acquiree, to:
Cataract, Inc.
c/o Robert L. Starer
660 Newtown Yardley Road
Newtown, PA 18940
Telephone Number: (215) 968-8808
with a courtesy copy to:
John E. Murdock III
Boult, Cummings, Conners & Berry
P.O. Box 198062
414 Union Street, Suite 1600
Nashville, TN 37219
Telephone Number: (615) 252-2359
Telecopier Number: (615) 252-2380
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.
15. Miscellaneous.
(a) Release and Discharge. By virtue of their execution of this
Agreement, as of the Closing Date and thereafter, the Acquiree Shareholders do
hereby jointly and severally agree to release, remise and forever discharge
Acquiree from and against any and all debts, obligations, liabilities and
amounts owing from the Acquiree to the Acquiree Shareholders, except for
Permitted Dividends, and the Acquiree is not obligated to take any action or
make any payments to third parties on behalf of any such Acquiree Shareholder.
Additionally, as of the Closing Date, the Acquiree agrees to release, remise
and forever discharge Acquiree Shareholders from and against any and all
debts, obligations, liabilities and amounts owing from the Acquiree
Shareholders to the Acquiree, only to the extent such release and discharge
does not conflict with any of the representations and warranties contained in
Section 4 of this Agreement.
(b) 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.
(c) Nature of Representations and Warranties. All of the
parties hereto are executing and carrying out the provisions of
this Agreement
37
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\PHILA2\63461_6
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.
(d) Costs and Expenses. Each party hereto agrees to pay its
own costs and expenses incurred in negotiating this Agreement and
consummating the transactions described herein.
(e) Time. Time is of the essence.
(f) Survival of Representations. All covenants, agreements,
representations and warranties made herein shall survive the
Closing Date through all applicable statutes of limitation. 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.
(g) 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.
(h) 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.
(i) Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other
parties.
(j) Choice of Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania.
(k) 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.
(l) Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular
or plural as the context may require.
(m) Number and Gender. Words used in this Agreement,
regardless of the number and gender specifically used, shall be
deemed and construed to
38
<PAGE>
\PHILA2\63461_6
include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context indicates
is appropriate.
(n) 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.
(o) 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.
(p) 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.
(q) Arbitration.
(i) If a dispute,controversy or claim arises between any of
the parties to this Agreement including without limitation any
dispute, controversy or claim that arises out of or relates to
this Agreement or any other agreement or instrument between the
parties, or the breach, termination or invalidity of the
Agreement or any such other agreement or instrument, AND
including but not limited to a claim based on or arising out of a
claim for tortious interference or other tortious or statutory
claims arising before, during or after termination, and if said
dispute cannot be settled through direct discussions, the parties
agree to first endeavor to settle the dispute in an amicable
manner by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules, before
resorting to arbitration; provided, that nothing contained herein
shall preclude any party from commencing arbitration if said
mediation is not completed within 30 days of such party
requesting or agreeing to mediation. Thereafter, any unresolved
dispute, controversy or claim arising between the parties,
including without limitation any dispute, controversy or claim
that arises out of or relates to this Agreement or any other
agreement or instrument between the parties, or breach thereof,
AND including but not limited to a claim for tortious
interference or other tortious or statutory claims arising
before, during or after termination, shall be settled by
arbitration administered by the American Arbitration Association
in accordance with its Commercial Arbitration
39
<PAGE>
\PHILA2\63461_6
Rules (the "Rules"), and judgment upon any award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof. Any mediation or arbitration hereunder shall be pursuant
to the applicable rules of the American Arbitration Association
as set out above except to the extent expressly provided
otherwise in this Agreement.
(ii) The parties hereto expressly agree that any court with
jurisdiction may order the consolidation of any arbitrable
dispute,controversy or claim under this Agreement with any
related arbitrable dispute, controversy or claim not arising
under this Agreement, as the court may deem necessary int he
interests of justice or efficiency or on such other grounds as
the court may deem appropriate.
(iii) The site of the mediation and, if necessary, the
arbitration shall be in Philadelphia, Pennsylvania and shall take
place in the officers of the American Arbitration Association or
such other place as the parties may agree.
(iv) The parties agree that the Federal and state courts
located in the Commonwealth of Pennsylvania shall have exclusive
jurisdiction over an action brought to enforce the rights and
obligations created in or arising from this Agreement to
arbitrate, and each of the parties hereto irrevocably submits to
the jurisdiction of said courts. Notwithstanding the above,
application may be made by a party to any court of competent
jurisdiction wherever situated for enforcement of any judgment
and the entry of whatever orders are necessary for such
enforcement.
(v) Process in any action arising out of or relating to this
Agreement may be served on any party to the Agreement anywhere in
the world by delivery in person against receipt or by registered
or certified mail, return receipt requested.
(vi) Neither party nor the arbitrators may disclose the
existence, content, or results of any arbitration hereunder
without the prior written consent of both parties.
(vii) The parties agree that all questions concerning the
arbitrator's jurisdiction shall be decided by the arbitrator.
(viii) All fees and expenses of the arbitration (exclusive
of filing fees for claims and counterclaims) shall be borne by
the parties equally. Each party shall bear the expense of its own
counsel, experts, witnesses, and presentation of proofs.
(ix) This agreement to arbitrate is intended to be binding
upon the signatories hereto, their principals, successors,
assigns, subsidiaries or affiliates.
40
<PAGE>
\PHILA2\63461_6
(x) The arbitrator shall determine the rights and
obligations of the parties according to the substantive laws of
the Commonwealth of Pennsylvania (excluding conflicts of laws
principles).
(xi) The arbitrator is directed to consider any defense that
all or part of the claim is not timely by reason of laches or
statute of limitations as a preliminary issue and to render an
award determining the merits of such claim before considering the
substantive merits of the arbitration claim, unless the
arbitrator determines that the merits of such claim or laches or
statute of limitations is so intertwined with the substantive
merits of the arbitration claim as to make impractical the
determination of the claim of laches or limitations as a
preliminary matter.
(xii) The arbitrator shall hear and determine any
preliminary issue of law asserted by a party to be dispositive of
any claim, in whole or part, in the manner of a court hearing a
motion to dismiss for failure to state a claim or for summary
judgment, pursuant to such terms and procedures as the arbitrator
deems appropriate.
(xiii) It is the intent of the parties that, barring
extraordinary circumstances, any arbitration shall be concluded
within three months of the date the statement of claim is
received by the arbitrator. Unless the parties otherwise agree,
once commenced, hearings shall be held five days a week, four
weeks a month, with each hearing day to begin at 9:00 A.M. and to
conclude at 5:00 P.M. These time limits can be extended or
altered by an agreement by the parties or by a determination by
the arbitrator that such extension or alteration is in the
interests of justice. The arbitrator shall use his or her best
efforts to issue the final award or awards within a period of
thirty days after closure of the proceedings. Failure to do so
shall not be a basis for challenging the award.
(xiv) The procedures to be followed in any arbitration
hereunder shall be as prescribed herein and in such directives
that shall be issued by the arbitrator following consultation
with the parties. Unless otherwise agreed by the parties, the
procedures shall provide for the submission of briefs by the
parties the introduction of documents and the oral testimony of
witnesses, cross-examination of witnesses, oral arguments, the
closure of the proceedings and such other matters as the
arbitrator may deem appropriate. Further, the arbitrator shall
regulate all matters relating to the conduct of the arbitration
not otherwise provided for in this Agreement or in the Rules.
(xv) In the event a party, having been given notice and
opportunity, shall fail or shall refuse to appear or participate
in an arbitration hereunder or in any stage thereof, the
proceedings shall nevertheless be conducted to conclusion and
final award. Any award rendered under such circumstances shall be
as valid and enforceable as if both parties had appeared and
participated fully at all stages.
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<PAGE>
\PHILA2\63461_6
(xvi) The parties agree that discovery shall be limited and
shall be handled expeditiously. Discovery procedures available in
litigation before the courts shall not apply in an arbitration
conducted pursuant to this Agreement. However, each party shall
produce relevant and non-privileged documents or copies thereof
requested by the other parties within the time limits set and to
the extent required by order of the arbitrator. All disputes
regarding discovery shall be promptly resolved by the arbitrator.
(xvii) It is the intent of the parties that the testimony of
witnesses be subject to cross-examination. It is agreed that the
direct testimony of a witness may be submitted by sworn
affidavit, provided that such affiant be subject to
cross-examination.
(xviii) Strict rules of evidence shall not apply in an
arbitration conducted pursuant to this Agreement. The parties may
offer such evidence as they desire and the arbitrator shall
accept such evidence as the arbitrator deems relevant to the
issues and accord it such weight as the arbitrator deems
appropriate.
(xix) No witness or party may be required to waive any
privilege recognized by law.
(r) Binding Nature. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the
parties hereto.
(s) 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.
(t) 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.
(u) 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.
(v) 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 the Acquiror, 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 the Acquiror. Accordingly, the Acquiree
Shareholders agree that they will not purchase or sell any
securities of the Acquiror, or communicate such information to
any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell
securities of the
42
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\PHILA2\63461_6
Acquiror, 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.
43
<PAGE>
\PHILA2\63461_6
IN WITNESS THEREOF, the parties have executed this Agreement on the date
first above written.
RCM TECHNOLOGIES, INC.
ATTEST
By:/s/STANTON REMER By: /S/LEON KOPYT
Secretary Name:LEON KOPYT
Title:PRESIDENT
CI ACQUISITION CORP.
ATTEST
By:/S/STANTON REMER By:/S/ LEON KOPYT
Secretary Name:LEON KOPYT
Title: PRESIDENT
44
<PAGE>
\PHILA2\63461_6
CATARACT, INC.
ATTEST
By: /S/JAMES R/ AFFLECK, JR By:/S/ ROBERT L.STARER
Secretary Name:ROBERT L. STARER
Title: CHAIRMAN OF BOARD
/S/ JOSEPH A. MARUBBIO
Joseph A. Marubbio
/S/ PAULA A. MARUBBIO
Paula Marubbio
/S/ ROBERT L. STARER
Robert L. Starer
/S/ MERLE A. STARER
Merle A. Starer
/S/ JAMES R. AFFLECK, JR
James R. Affleck, Jr.
/S/ SARAH B. AFFLECK
Sarah B. Affleck
45
\PHILA2\63539_1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of _August 30,--------,
1995 by and among RCM Technologies, Inc., a Nevada corporation (the "Company")
and the Shareholders of Cataract, Inc., a Pennsylvania corporation, listed on
Schedule "A" attached hereto and made a part hereof (the "Holders").
W I T N E S S E T H:
WHEREAS, the Company and Holders are parties to a Merger Agreement as of
even date herewith pursuant to which Cataract, Inc. has elected to effectuate
a merger with a newly formed subsidiary of the Company (the "Merger");
WHEREAS, pursuant to the Merger, the Holders are to receive certain
shares of the Company's Common Stock;
WHEREAS, the parties hereto desire to set forth their agreement
concerning the registration of the Company's common stock under the Securities
Act of 1933, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Definitions.
(a) "Company" shall mean RCM Technologies, Inc.
(b) "Holders" shall mean the former shareholders of Cataract,
Inc. who have received shares of the Company's Common Stock pursuant to the
Merger.
(c) "Merger" shall mean the Merger of Cataract, Inc. into CI
Acquisition Corp., a newly formed, wholly-owned subsidiary of the Company
pursuant to the terms of a Merger Agreement (the "Merger Agreement") entered
into on even date herewith.
(d) "Restricted Stock" shall mean the Common Stock of the Company
that have been distributed to the Holders pursuant to the Merger.
(e) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
at any relevant time.
(f) "SEC" shall mean the United States Securities and Exchange
Commission.
Capitalized terms used through this Registration Rights Agreement shall
have the same meaning ascribed thereto in the Merger Agreement.
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\PHILA2\63539_1
2. Demand Registration.
(a) Upon written request from the Holders who own a majority of the
Restricted Stock, the Company has agreed, commencing upon the expiration of the
three (3) year period of the Merger Agreement, to, as shortly thereafter as is
practicable, on one occasion only, prepare and file a Registration Statement
with the SEC and use its best efforts to promptly have such Registration
Statement declared effective for the purpose of facilitating the public resale
of the Restricted Stock. Notwithstanding the above, no request made under this
paragraph shall require a Registration Statement requested therein to become
effective prior to 180 days after the effective date of a Registration Statement
filed by the Company covering an underwritten public offering of Common Stock.
(b) Promptly following receipt of any such notice, the Company shall
immediately notify any Holders who did not deliver such notice requesting
registration and shall register under the Securities Act, for public sale in
accordance with the method of disposition specified in such notice from
requesting holders making request pursuant to the first sentence of Paragraph
2(a) above, the number of shares of Restricted Stock specified in such notice
(and in any notices received from other Holders within 20 days after their
receipt of such notice from the Company). If such method of disposition shall be
an underwritten public offering, Holders owning a majority of the shares of
Restricted Stock to be sold may designate the managing underwriter of such
offering, subject to the approval of the Company, which approval shall not be
unreasonably withheld.
(c) The Company shall be entitled to include in any Registration Statement
referred to in subparagraph (a) of this paragraph 2, shares of common stock to
be sold by the Company for its own account (or by other holders of common stock,
if all shares which the Company wishes to register for its own account have been
included), provided, however, that if the registration demanded by the Holders
pursuant to paragraph 2(a) is an underwritten registration and the managing
underwriter states in writing that the inclusion of shares by the Company or
other holders pursuant to this paragraph 2(c) could delay or reduce the price of
such offering, then the number of shares that may be included by the Company or
the other holders will be cut back to a level deemed satisfactory by the
managing underwriter.
(d) The Company's obligation in Subparagraphs 2(a) and 2(b) above extends
only to the use of the Company's best efforts to register such shares pursuant
to a Registration Statement. The Company shall indemnify and hold harmless the
Holders and any underwriter or managing underwriter designated by the Holders,
to cooperate with such underwriter, pursuant to an underwriting agreement
containing usual and customary terms, but shall not be obligated to obtain a
commitment from an underwriter relative to the sale of such shares, whether in a
public offering or private placement transaction. Furthermore, the Holders so
electing to register their shares hereby agree, as a condition precedent to such
registration, to provide the Company with a certificate or
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\PHILA2\63539_1
certificates evidencing compliance with the Securities Act and all
applicable rules and regulations thereunder.
3. Registration Procedures. If and whenever the Company is required by the
provisions of paragraph (2) hereof to effect the registration of any of the
Restricted Stock under the Securities Act, the Company will use its best efforts
to:
(a) prepare and file with the Commission a Registration Statement with
respect to such securities and use its best efforts to cause such Registration
Statement to become and remain effective for the period of the distribution
contemplated thereby or as required under the Securities Act;
(b) prepare and file with the Commission such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective for the period
specified in Subparagraph 3(a) above and as comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such Registration Statement in accordance with the sellers' intended method
of disposition set forth in such Registration Statement for such period;
(c) furnish to each seller and to each underwriter such number of copies of
the Registration Statement and the prospectus included therein (including each
preliminary prospectus), as such persons may reasonably request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such Registration Statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such Registration Statement under the securities or blue sky laws of
such jurisdictions as the sellers, or, in the case of an underwritten public
offering, the managing underwriter shall reasonably request; provided, however,
that the Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where it is
not so qualified or to consent to general service of process in any such
jurisdiction;
(e) immediately notify each seller under such Registration Statement and
each underwriter, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the prospectus contained in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required or necessary to be stated therein in order to make the
statements contained there in not misleading in light of the circumstances then
existing;
(f) make available for inspection by each seller, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any such
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<PAGE>
\PHILA2\63539_1
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(g) For purposes of Subparagraphs 3(a) and 3(b) above, the period of
distribution of Restricted Stock shall be deemed to extend for nine months (120
days in the case of registration on Form S-3) or such earlier date as (A) in an
underwritten public offering, each underwriter has completed the distribution of
all securities purchased by it; and (B) in any other registration, all shares of
Restricted Stock covered thereby shall have been sold; and
(h) if the Common Stock of the Company is listed on any securities exchange
or automated quotation system, the Company shall use its best efforts to list
(with the listing application being made at the time of the filing of such
Registration Statement or as soon thereafter as is reasonably practicable) the
Restricted Stock covered by such Registration Statement on such exchange or
automated quotation system.
4. Expenses.
(a) For the purposes of this Paragraph (4), the term "Registration
Expenses" shall mean: all expenses incurred by the Company in complying with
paragraph (2) of this Agreement, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company (other than the expenses of any
special audit as described below), fees of the National Association of
Securities Dealers, Inc. ("NASD"), fees and expenses of listing shares of
Restricted Stock on any securities exchange or automated quotation system on
which the Company's shares are listed and fees of transfer agents and
registrars. The term "Selling Expenses" shall mean: all underwriting discounts
and selling commissions applicable to the sale of Restricted Stock, all
accountable or non-accountable expenses paid to any underwriter in respect of
the sale of Restricted Stock, the cost of any special (i.e., other than fiscal
year-end) audit required by the Securities Act as a result of the Company's
obligation to maintain a Registration Statement current for nine months or
required by the Securities Act or by the managing underwriter.
(b) Except as otherwise provided herein or in subparagraph (c) hereof, the
Company will pay all Registration Expenses in connection with the Registration
Statement filed pursuant to paragraph (2) of this Agreement. All Selling
Expenses in connection with any Registration Statement filed pursuant to
paragraph (2) of this Agreement shall be borne by the participating sellers in
proportion to the number of shares sold by each, or by such persons other than
the Company (except to the extent the Company shall be a seller) as they may
agree.
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<PAGE>
\PHILA2\63539_1
(c) Notwithstanding the foregoing provisions of this paragraph (4), in the
event that the Company shall receive instructions by the Holders of not less
than a majority of the Shares of Restricted Stock as to which registration has
been requested pursuant to paragraph (2) of this Agreement that it should not
cause such registration to become effective, then unless the Company shall elect
to proceed with such registration for the account of the Company and/or other
sellers, at the election of such Holders, either:
(A) the Registration Expenses that are incurred by and the obligation of
the Company in connection with such proposed registration shall be paid by the
proposed sellers thereunder, such expenses to be shared pro rata according to
the value of the securities requested to be registered, and, in such case, for
all purposes of paragraph (2) of this Agreement, such request for registration
shall be deemed not to have been made; or
(B) the Registration Expenses that are incurred by and the obligation of
the Company in connection with such registration shall be paid by the Company
and such request for registration shall be deemed to have been effected.
(d) In the event that the Company elects to proceed with a registration,
which has been subject to an election pursuant to Subparagraph (c) above, for
the account of the Company and/or other sellers, the Holders who had requested
registration shall only be liable for Registration Expenses specifically
attributable to them, such as registration and filing fees in respect of their
shares, and, for purposes of paragraph (2) of this Agreement, such holders'
request for registration shall be deemed not to have been made. Notwithstanding
anything to the contrary set forth herein or in subparagraph (c) above, the
Holders will, at all times, be wholly responsible for any and all Selling
Expenses relating to such registrations.
5. Obligations of Holder.
(a) In connection with each registration hereunder, each selling Holder
will furnish to the Company in writing such information with respect to such
seller and the securities held by such seller, and the proposed distribution by
them as shall be reasonably requested by the Company in order to assure
compliance with federal and applicable state securities laws, as a condition
precedent to including such seller's Restricted Stock in the Registration
Statement. Each selling Holder also shall agree to promptly notify the Company
of any changes in such information included in the Registration Statement or
prospectus as a result of which there is an untrue statement of material fact or
an omission to state any material fact required or necessary to be stated
therein in order to make the statements contained there in not misleading in
light of the circumstances then existing.
(b) In connection with each registration pursuant to paragraph (2) of this
Agreement, the Holders included therein will not effect sales thereof until
notified by the Company of the effectiveness of the Registration
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<PAGE>
\PHILA2\63539_1
Statement, and thereafter will suspend such sales after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a Registration Statement or prospectus. At the end
of any period during which the Company is obligated to keep a Registration
Statement current, the Holders included in said Registration Statement shall
discontinue sales of shares pursuant to such Registration Statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such Registration Statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
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\PHILA2\63539_1
6. Miscellaneous Provisions.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
(b) Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Company and the Holders.
(d) Notices. All communications under this Agreement shall be sufficiently
given if delivered by hand or by overnight courier or mailed by registered or
certified mail, postage prepaid, addressed,
(i) if to the Company, to:
Mr. Leon Kopyt
Chief Executive Officer
RCM Technologies, Inc.
2500 McClellan Avenue, Suite 350
Pennsauken, New Jersey 08109-4613
with a copy to:
Stephen M. Cohen, Esquire
Clark, Ladner, Fortenbaugh & Young
One Commerce Square
2005 Market Street, 22nd Floor
Philadelphia, PA 19103
or, in the case of the Holders, at such address as each such Holder shall
have furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto.
(e) Successors and Assigns; Holders as Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the parties and their respective
successors and assigns, and the agreements of the Company herein shall inure to
the benefit of all Holders and their respective successors and assigns.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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\PHILA2\63539_1
(g) Entire Agreement; Survival; Termination. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Very truly yours,
RCM TECHNOLOGIES, INC.
By: /s/Leon Kopyt_____
Name:Leon Kopyt
Title:President
Agreed and accepted this
30th day of August_, 1995:
The Holders listed on Schedule A hereto.
/s/Joseph A Marubio___________ __/s/Paula A. Marubio_________
Joseph A. Marubbio Paula Marubbio
/s/ Robert L. Starer___________ _/s/Merle A. Starer____________
Robert L. Starer Merle A. Starer
/s/James R. Affleck, Jr._______ _/s/Sarah A. Affleck___________
James R. Affleck, Jr. Sarah B. Affleck
8
<PAGE>
\PHILA2\63539_1
SCHEDULE A
List of Shareholders of Cataract, Inc.
Joseph A. Marubbio
Paula Marubbio
Robert L. Starer
Merle A. Starer
James R. Affleck, Jr.
Sarah B. Affleck
9
\PHILA2\63878_3
VOTING TRUST AGREEMENT
This Agreement is entered into as of August 30, 1995, by and among RCM
Technologies, Inc., a Nevada corporation (referred to herein as both "Trustee"
and "Corporation") and JOSEPH A. MARUBBIO, PAULA MARUBBIO, ROBERT L. STARER,
MERLE A. STARER, JAMES R. AFFLECK, JR. and SARAH B. AFFLECK, (the
"Shareholders").
WHEREAS, the Shareholders are entitled to shares of the common stock of the
Corporation pursuant to a Merger Agreement dated _July 31, __, 1995, among the
Corporation, CI Acquisition Corp., Cataract, Inc. and the Shareholders ("Merger
Agreement"); and
WHEREAS, the Shareholders have agreed to pledge these shares to the
Corporation in order to secure the performance of certain obligations under the
Merger Agreement;
WHEREAS, the terms of this pledge arrangement are covered in a Pledge
Agreement dated August 30,___, 1995, among the Shareholders ("Pledge
Agreement");
WHEREAS, upon expiration of the Pledge Agreement, the Shareholders have
agreed to place the Trust Shares as defined herein, in a Voting Trust upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Shareholders do
hereby bind themselves and their heirs, executors, administrators and permitted
assigns, and the Trustee does hereby bind itself, and agree as follows:
1. Transfer of Stock to Trustee. Each of the Shareholders hereby agrees to
transfer and assign to the Trustee the number of shares of the Corporation's
common stock such Shareholder may receive pursuant to the Merger Agreement and
upon expiration of the Pledge Agreement (the "Trust Shares"). The Trustee shall
hold the Trust Shares for the benefit of the Shareholders under the terms and
conditions of this Agreement.
2. Issuance of Voting Trust Certificates. Upon receipt of the certificates
representing the Trust Shares, the Trustee shall issue to each of the
Shareholders a Voting Trust Certificate, in the form attached hereto as Exhibit
"A", for the number of Trust Shares transferred by the Shareholder to the
Trustee. The Trustee shall keep a list of all Trust Shares transferred to it
hereunder, and a list of all Voting Trust Certificates issued, which records
shall include the names and addresses of all Voting Trust Certificate holders
and the number of shares represented by each Certificate.
3. Transfer of Voting Trust Certificates. Each Voting Trust Certificate
shall be transferable in the same manner as the shares represented by such
Certificate would be transferable. However, each Shareholder agrees that during
the term of this Agreement they will not sell, transfer or assign any Voting
Trust Certificate.
4. Trustee to Vote Stock. The Trustee shall vote the Trust Shares in person
or by proxy at all meetings of the Shareholders of the Corporation, and in all
proceedings wherein the vote or written consent of Shareholders may be required
or authorized by law. The Trustee shall vote the Trust Shares for the election
of such directors, and in favor of or against any resolution or proposed action
presented at any meeting or requiring the consent of the Corporation's
shareholders, in the same manner and in the same proportion as all other votes
of the Corporation's common stock which are cast as to that issue.
1
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\PHILA2\63878_3
5. Dividends. All cash dividends or other distributions which may accrue as
to the Trust Shares shall be paid directly to the Shareholders in proportion to
the number of Trust Shares beneficially owned by them as shown on the
outstanding Voting Trust Certificates.
6. Term - Release of Trust Shares. The Trust Shares shall be held by the
Trust until the earlier of: (i) the public or private sale of such Trust Shares
in open market transactions to Unaffiliated Third Parties; or (ii) the
resignation, removal from office or if for any other reason Leon Kopyt ceases to
serve as Chairman, Chief Executive Officer and President of the Corporation.
Notwithstanding the above, one-third of the Trust Shares shall be released from
Trust commencing upon the fifth annual anniversary of the date of this Voting
Trust Agreement, and thereafter an additional one-third of the Trust Shares
shall be released from Trust upon each of the sixth and seventh annual
anniversaries of the date of this Voting Trust Agreement.
When all of the Trust Shares have been released to the Shareholders in
accordance with this Section, this Agreement shall terminate and shall be of no
further force or effect. Additionally, this Agreement shall terminate if RCM
fails to satisfy its obligations in the manner and to the extent set forth in
the Registration Rights Agreement as attached to and made a part of the Merger
Agreement.
7. Trustee Not Bound. The Trustee shall not be bound by any waiver,
modification, amendment, termination or rescission of this Voting Trust
Agreement unless in writing, signed by all of the parties hereto, and further,
if the duties or responsibilities of the Trustee hereunder are affected, the
Trustee shall not be bound by any waiver, modification or amendment, termination
or recision of this Voting Trust Agreement, unless it has given its prior
written consent thereto.
8. Cost and Expenses. Any fees, costs or expenses incurred by the Trustee
in connection with a dispute arising under this Voting Trust Agreement shall be
borne by the prevailing party to such dispute.
9. Filing of Agreement. A copy of this Agreement shall be retained at the
registered office of the Corporation in the State of Nevada, and shall be open
to the inspection of the Shareholders daily during business hours. A copy of
this Agreement shall also be maintained at the principal offices of the
Corporation in Pennsauken, New Jersey.
10. Miscellaneous.
(a) 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.
(b) 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.
(c) Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
2
<PAGE>
\PHILA2\63878_3
(e) Binding Effect. The provisions of this Agreement shall be binding upon
and inure to the benefit of each of the parties and their respective legal
representatives, successors and assigns.
(f) Successor Trustee. Upon the death, disability, or resignation of the
Trustee, a successor trustee shall be designated and appointed as the successor
trustee by the Board of Directors of the Corporation. The parties hereto to this
Agreement, agree to take all actions necessary to amend this Voting Trust
Agreement in the event that a successor trustee is appointed by the Board of
Directors of the Corporation.
(g) Dispute Resolution. Any dispute which shall arise hereunder, shall be
resolved in accordance and in the manner set forth in Section 15(q) of the
Merger Agreement.
(h) Definition of Unaffiliated Third Parties. For purposes of the Voting
Trust Agreement "Affiliate" means, with respect to any Shareholder, another
Person (i) who is an immediate family member of such Shareholder, (ii) in which
such Shareholder or any member of the Shareholder's immediate family has an
equity interest, in any degree, excepting only that ownership of an aggregate
amount of up to five percent (5%) of the equity of a publicly traded Person
shall not in itself cause such Person to be an Affiliate of the Shareholder,
(iii) of which such Shareholder or any member of the Shareholder's immediate
family serves as an executive officer, or (iv) which is Controlled by such
Shareholder or by an Affiliate of the Shareholder.
A Person is "Controlled by another Person" if the controlling Person has
the right to elect a majority of the directors or other members of the governing
body of such controlled Person.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization,
government, any agency or political subdivision thereof, or any other form of
entity.
"Unaffiliated Third Party" means a Person who is not an Affiliate of the
Shareholder.
(THIS SPACE LEFT BLANK INTENTIONALLY)
3
<PAGE>
\PHILA2\63878_3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
/s/ Joseph A. Marubbio
Joseph A. Marubbio
/s/ Paula Marubbio
Paula Marubbio
/s/ Robert L. Starer
Robert L. Starer
/s/ Merle A. Starer
Merle A. Starer
/s/ James R. Affleck, Jr.
James R. Affleck, Jr.
/s/ Sarah B. Affleck
Sarah B. Affleck
RCM Technologies, Inc.
By:/s/ Leon Kopyt, President
(Name, Title)
4
<PAGE>
\PHILA2\63878_3
EXHIBIT "A"
VOTING TRUST CERTIFICATE
RCM TECHNOLOGIES, INC.
_______________________________ ______________________________
Voting Trust Certificate Number Number of Shares Represented
VOTING TRUST CERTIFICATE
THIS CERTIFIES THAT is the legal and beneficial owner of ______ shares of
the common stock of RCM Technologies, Inc., a Nevada corporation (the
"Corporation"), said shares having been deposited with the undersigned Trustee
in accordance with a Voting Trust Agreement entered into by certain Shareholders
of the Corporation and the Trustee name hereunder, dated as of
__________________ __, 1995, copies of which are filed in the registered office
of the Corporation in the State of Nevada and in the Corporation's principal
offices in Pennsauken, New Jersey. This Voting Trust Certificate is issued in
accordance with the terms of the Voting Trust Agreement and is subject to the
provisions thereof.
(Trustee) Dated:_________________ By: (Name, Title)
5
\PHILA2\63557_1
INVESTOR REPRESENTATION CERTIFICATE
[CATARACT SHAREHOLDER]
RCM Technologies, Inc.
2500 McClellan Avenue
Suite 350
Pennsauken, New Jersey 08109-4613
Gentlemen:
This Certificate will acknowledge that in connection with a certain Merger
Agreement by and among the undersigned, RCM Technologies, Inc. ("RCM"), CI
Acquisition Corp. ("Acquiror") and Cataract, Inc. ("Acquiree") on even date
herewith, RCM has agreed to transfer to the undersigned certain shares of its
common stock (the "Shares").
This Certificate will further acknowledge that in connection with the
transfer of the Shares, the undersigned acknowledges and attests to the
following, all of which acknowledgements and attestations have been relied upon
by RCM in agreeing to transfer the Shares to the undersigned pursuant to such
Merger Agreement:
(i) except with respect to the rights granted to the undersigned pursuant
to the Registration Rights Agreement also entered into on even date herewith,
the Shares are not being registered under the Securities Act of 1933, as amended
(the "Act") on the basis of the statutory exemption provided by Section (4)2
thereof, relating to transactions not involving a public offering, and that
RCM's reliance on the statutory exemption thereof is based in part on the
representations made by the undersigned in this Certificate;
(ii) the undersigned acknowledges and represents: (a) that he has reviewed
such quarterly, annual and periodic reports of RCM as have been filed with the
Securities and Exchange Commission (the "Reports") and that he has such
knowledge and experience in financial and business matters that he is capable of
utilizing the information set forth therein, concerning RCM to evaluate the risk
of investing in RCM; (b) that he has been advised that the Shares to be issued
to him by RCM will not be registered under the Act, except as otherwise provided
in the Registration Rights Agreement, and accordingly, he may only be able to
sell or otherwise dispose of such Shares in accordance with Rule 144 or except
as otherwise provided in the Registration Rights Agreement; (c) that the Shares
will be held for investment and not with a view to, or for resale in connection
with the public offering or distribution thereof; (d) that the Shares so issued
will not be sold without registration thereof under the Act (unless the Shares
are subject to registration or in the opinion of counsel to the Company an
exemption from such registration is available), or in violation of any law; and
(e) that Certificate or Certificates representing the Shares to be issued will
be imprinted with a legend in form and substance substantially as follows:
1
<PAGE>
\PHILA2\63557_1
"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. THE CERTIFICATES
REPRESENTING THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS UPON RESALE
AND TO THE TERMS AND PROVISIONS OF A STOCK PLEDGE AGREEMENT DATED
August 30___________, 1995.
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 transfer agent's books and records to
assure compliance with the Securities Act of 1933, as amended.
(iii) the undersigned has been afforded the opportunity to review and is
familiar with the Reports of RCM and has based his decision to invest solely on
the information contained therein and has not been furnished with any other
literature, prospectus or other information except as included in the Reports;
(iv) the undersigned is able to bear the economic risks of an investment in
the Shares and he represents and warrants that his overall commitment to his
investments which are not readily marketable is not disproportionate to his net
worth;
(v) (a) he is at least 21 years of age; (b) he has adequate means of
providing for his current needs and personal contingencies; (c) he has no need
for liquidity in his investment in the Shares; (d) he maintains his domicile and
is not a transient or temporary resident at the address shown above; and (e) all
of his investments and commitments to non-liquid assets and similar investments
are, and after his acquisition of the Shares, will be reasonable in relation to
his net worth and current needs;
(vi) the undersigned understands that no federal or state agency has
approved or disapproved the Shares, passed upon or endorsed the merits of the
transfer of the Shares set forth within the Merger Agreement or made any finding
or determination as to the fairness of the Shares for investment; and
(vii) the undersigned recognizes that the Shares of common stock of RCM are
presently eligible for trading on The NASDAQ Stock Market-Small Cap Index,
however, that RCM has made no representations, warranties or assurances as to
the future trading value of the Shares, whether a public market will continue to
exist for the resale of the Shares, or whether the Shares can be sold at a price
reflective of past trading history at any time in the future.
2
<PAGE>
\PHILA2\63557_1
The undersigned agrees to indemnify and hold harmless RCM, Acquiror and
both of their officers, directors and employees from and against any and all
loss, damage or liability (including attorney's fees), due to, or arising out
of, a breach of any representation or warranty made by the undersigned contained
in this Investor Representation Certificate. Furthermore, the undersigned
acknowledges that this Investor Representation Certificate constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior or contemporaneous agreements. Furthermore, the
representations, warranties and agreements contained herein shall survive
delivery of the Shares.
IN WITNESS WHEREOF, the undersigned has executed this Investor
Representation Certificate on this _30th day of _August________, 1995.
_________________________ ________________________________
Witness [Cataract Shareholder]
3
\PHILA2\69790_2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made as of this day of , 19 , by and between
the undersigned Shareholders of Cataract, Inc., a Pennsylvania corporation (in
the aggregate, "Pledgors") and RCM Technologies, Inc., a Nevada corporation and
CI Acquisition Corp., a Pennsylvania corporation (in the aggregate, "Pledgee").
W I T N E S S E T H:
WHEREAS, Pledgors, as the holders of 100% of the common stock of Cataract,
Inc. ("Acquiree"), a Pennsylvania corporation, are parties to a Merger Agreement
(the "Merger Agreement") pursuant to which Acquiree has agreed to merge with and
into CI Acquisition Corp. ("Acquiror"), a wholly-owned subsidiary of RCM
Technologies, Inc. ("RCM");
WHEREAS, pursuant to the Merger Agreement, Pledgors shall upon the Closing
Date of the Merger ("Closing Date") receive certain shares of the common stock
of RCM (the "Merger Shares");
WHEREAS, Pledgors have assumed certain obligations in the Merger Agreement
to provide certain indemnification to RCM and Acquiror as well as assume
responsibility for the payment of certain liquidated damages in the event of,
among other things, a misrepresentation, breach of representation or warranty or
breach of any covenant of Acquiree or Acquiree Shareholders;
WHEREAS, in order to induce Acquiror and RCM to enter into the Merger
Agreement and consummate the transactions necessary to complete the Merger,
Pledgors have agreed to pledge all of their Merger Shares as collateral
securities for the prompt satisfaction of all of their respective obligations as
Acquiree Shareholders under the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing, the premises herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
(a) The term "Allocable Share" as used herein shall mean a fraction, the
numerator of which is the number of shares of Pledged Stock owned by a Pledgor,
and the denominator of which is the total number of shares of the Pledged Stock
owned by all Pledgors. Pledgors who jointly own shares of Pledged Stock shall be
regarded jointly as a single Pledgor under this Agreement for the purpose of
this definition and for all other purposes in this Agreement where such
apportionment would be relevant.
(b) The Term "Closing Value Compensating Shares" as used herein shall mean
Pledged Stock and, if applicable, other shares of the common stock of RCM, which
have an aggregate "valuation" equal to or greater than the amount of a
Liquidated Damage Obligation. For this purpose, the "valuation" of the Pledged
Stock shall be equal to the "valuation" of the Merger Shares established in
Paragraph 2(a) of the Merger Agreement.
(c) The term "Indemnity Obligation" as used herein shall mean all of the
Obligations of the Acquiree and Acquiree Shareholders to RCM, and/or Acquiror
under the Merger Agreement, with the exception of Liquidated Damage Obligations.
(d) The term "Liquidated Damage Obligation" as used herein shall mean the
Obligations of the Acquiree and Acquiree Shareholders to RCM and/or Acquiror
under Paragraph 10.2 of the Merger Agreement.
1
<PAGE>
(e) The term "Obligations" as used herein shall mean all of the obligations
of the Acquiree and Acquiree Shareholders to RCM and/or Acquiror under the
Merger Agreement, including but not limited to those specific obligations under
paragraph 6, "Covenants of the Parties to this Agreement," paragraph 10,
"Conditions Subsequent" and paragraph 11, "Indemnification."
(f) The term "Pledged Stock" as used herein shall mean and include all of
the Merger Shares together with all certificates, options, rights or other
distributions issued as an addition to, in substitution of or in exchange for,
or on account of, any such shares and all proceeds thereof, now or hereafter
owned or acquired by Pledgors.
(g) Unless otherwise defined or indicated, all capitalized terms utilized
in the context of this Stock Pledge Agreement shall have the same definition
ascribed thereto in the Merger Agreement.
2. Pledge of Pledged Stock.
(a) As collateral security for the prompt satisfaction of all Obligations
of Acquiree Shareholders under the Merger Agreement, Pledgors hereby pledge,
assign, hypothecate, deliver and set over to Pledgee all of the Pledged Stock
and hereby grant Pledgee a lien on and security interest in all of the Pledged
Stock and the proceeds thereof.
(b) Simultaneous with the execution and delivery of this Stock Pledge
Agreement, Pledgors shall deliver the certificates representing the Pledged
Stock to Pledgee which shall hold said certificates on its own behalf as secured
party under this Stock Pledge Agreement. Pledgors by their execution and
delivery hereof expressly acknowledge and agree that such possession by Pledgee
shall constitute perfection of the security interest in the stock created
hereunder.
(c) If Pledgors shall become entitled to receive or shall receive any:
(i) Stock certificate, including, but without limitation, any certificate
representing a stock dividend or a distribution in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spin-off or split-off;
(ii) Option or right, whether as an addition to or in substitution of or in
exchange for any shares of the Pledged Stock, or otherwise;
(iii) Dividends payable in cash or property, including securities issued by
a party other than the issuer of the Pledged Stock; or
(iv) Dividends of distributions on dissolution, or in partial or total
liquidation, or from capital, capital surplus, or paid-in surplus,
then, Pledgors shall accept all such funds instruments or distributions as
Pledgee's agent, shall receive same in trust for Pledgee and shall deliver same
forthwith to Pledgee in the exact form received with, as applicable, Pledgors'
endorsement when necessary or appropriate stock powers duly executed in blank,
to be held by Pledgee, subject to the terms hereof, as further collateral
security for the Obligations.
<PAGE>
3. Voting Rights.
During the term hereof, Pledgee or its nominee shall have the right to
exercise all voting rights with respect to the Pledged Stock and shall likewise
have the right to exchange, at its discretion, any or all of the Pledged Stock
upon the merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof, or upon the exercise by such issuer of any
right, privilege or option pertaining to any of the Pledged Stock, and, in
connection therewith, to deposit and deliver any and all of the Pledged Stock
with any committee, depository, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine, all without liability
except to account for property actually received by it; but Pledgee shall have
no duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing. At all times
during the term hereof, any or all of the Pledged Stock held by Pledgee
hereunder may, at the option of Pledgee, be registered in Pledgee's name or in
the name of its nominee, and Pledgors hereby covenant that, upon demand therefor
by Pledgee, Pledgors will cause the issuer of the Pledged Stock to effect such
registration.
4. Default in the performance of the Obligations of Pledgors as Acquiree
Shareholders.
(a) Nonrecourse Obligation to Pay Liquidated Damage Obligations.
(i) Should Pledgors, as Acquiree Shareholders, incur a Liquidated Damage
Obligation, Pledgee shall give Pledgors written notice of the amount due and the
basis of calculating such amount. Within thirty (30) days after receipt of such
notice, each Pledgor shall give written notice to Pledgee of an election to
satisfy that Pledgor's Allocable Share of this obligation by either (x) payment
in cash, or (y) the conveyance to Pledgee of Closing Value Compensating Shares.
(ii) If a Pledgor elects to pay the Pledgor's Allocable Share of the
Liquidated Damages Obligation in cash, the cash payment shall be made in
immediately available funds within the said thirty (30) day period. Concurrently
with receipt of such payment by a Pledgor, all of that Pledgor's Pledged Stock
shall be released to the Pledgor by the Pledgee.
(iii) If a Pledgor elects to pay the Pledgor's Allocable Share of the
Liquidated Damages Obligation by the conveyance of Closing Value Compensating
Shares, Pledgor shall deliver to Pledgee an executed Absolute Assignment of
Shares within the said thirty (30) day period.
(iv) If a Pledgor fails to elect and perform under options 4(a)(i)(x) or
(y) above within the required time, then and in that event, if such default
continues, Pledgee may, as its exclusive remedy, upon ten (10) days prior
written notice to Pledgors, but without any further demand of performance or
other demand, advertisement or further notice of any kind to or upon Pledgors or
any other person (all and each of which demands, advertisements and notices are,
to the extent permitted by law, hereby expressly waived), forthwith collect,
receive, appropriate and realize upon the Pledged Stock owned by such Pledgor,
or any part thereof, and may forthwith sell, assign, give an option or options
to purchase, contract to sell or otherwise dispose of and deliver the Pledged
Stock, or any part thereof, in one or more parcels at public or private sale or
sales, at any exchange, broker's board or at any of Pledgee's offices or
elsewhere at such prices and on such terms (including, but without limitation, a
requirement that any purchaser of all or any part of the Pledged Stock purchase
the shares constituting the Pledged Stock for investment and without any
intention to make a distribution thereof) as it may deem best, for cash or on
credit, for future delivery without assumption of any credit risk, with the
right to Pledgee or any purchaser upon any such sale or sales, public or
private, to purchase the whole or any part of the Pledged Stock so sold free of
any right or equity of redemption in Pledgors, which right or equity is hereby
expressly waived and released. No Pledged Stock belonging to any Pledgor shall
be disposed of pursuant to this subparagraph 4(a)(iv) on account of the failure
of any other Pledgor to elect and perform under options 4(a)(i)(x) or (y) above.
<PAGE>
(v) Notwithstanding the provisions of subparagraphs (i), (ii), (iii) or
(iv) above, in the event a Liquidated Damages Obligation arises, and to the
extent that Pledgee realizes upon the Pledged Stock under subparagraph 4(a)(iv)
above in order to secure repayment of such Liquidated Damages Obligation, then,
and in that event, to the extent that the number of shares of Pledged Stock
being held by Pledgee are less than the number of Closing Value Compensating
Shares applicable to that Liquidated Damages Obligation, then, and in that
event, Acquiree Shareholders (with the exception of the Afflecks) shall have an
obligation to secure, in market transactions or otherwise, and transfer to
Pledgee, a sufficient number of shares of common stock of RCM so as to vest in
Pledgee sufficient shares of RCM common stock which when added to the Pledged
Stock shall be sufficient to equal such number of shares.
(vi) Notwithstanding any other provision of this Agreement, of the Merger
Agreement, or of any other document, the liability of Pledgors hereunder and as
Acquiree Shareholders under the Merger Agreement shall be limited, only as
respects any Liquidated Damages Obligation, to the recourse provided in this
paragraph 4, and no judgment or decree shall be sought or obtained against any
Pledgor for the satisfaction of a Liquidated Damages Obligation, excepting only
that Pledgee may seek and obtain a judgment for damages against Pledgors
resulting from the breach of an obligation to "cover" shortfalls in the number
of shares included in the Pledged Stock under subparagraph 4(a)(vi) hereof.
(b) Recourse Obligation to Pay Indemnity Obligations.
(i) Should Pledgors, as Acquiree Shareholders, incur an Indemnity
Obligation to Pledgee, Pledgee shall give Pledgors written notice of the amount
due and the basis of calculating such amount.
(ii) If a Pledgor fails to elect and perform under subparagraph (i) above
within the required time, then and in that event, if such default continues,
Pledgee may, in addition to any other available remedy, upon ten (10) days prior
written notice to Pledgors, but without any further demand of performance or
other demand, advertisement or further notice of any kind to or upon Pledgors or
any other person (all and each of which demands, advertisements and notices are,
to the extent permitted by law, hereby expressly waived), forthwith collect,
receive, appropriate and realize upon the Pledged Stock or any part thereof and
may forthwith sell, assign, give an option or options to purchase, contract to
sell or otherwise dispose of and deliver the Pledged Stock or any part thereof,
in one or more parcels at public or private sale or sales, at any exchange,
broker's board or at any of Pledgee's offices or elsewhere at such prices and on
such terms (including, but without limitation, a requirement that any purchaser
of all or any part of the Pledged Stock purchase the shares constituting the
Pledged Stock for investment and without any intention to make a distribution
thereof) as it may deem best, for cash or on credit, for future delivery without
assumption of any credit risk, with the right to Pledgee or any purchaser upon
any such sale or sales, public or private, to purchase the whole or any part of
the Pledged Stock so sold free of any right or equity of redemption in Pledgors,
which right or equity is hereby expressly waived and released. Notwithstanding
any other provision hereof, in the event of a disposition of Pledged Stock
arising from the failure of any Pledgor to otherwise satisfy such Shareholder's
Allocable Share of any Obligation, the Pledged Stock of that Pledgor shall be
disposed of prior to the disposition of Pledged Stock owned by any other
Pledgors.
(c) Application of Proceeds.
The proceeds of any collection, recovery, receipt, appropriation,
realization or sale as aforesaid shall be applied as follows:
(i) First, to the costs and expenses of every kind (including without
limitation reasonable attorney's fees) incurred in connection therewith or
incidental to the care, safekeeping or otherwise of any of the Pledged Stock
or in any way relating to the rights of Pledgee hereunder,
(ii) Second, to the satisfaction of the Obligations; and
(iii) Third, to Pledgors to the extent of the surplus proceeds, if any.
In the event that the proceeds of any collection, recovery, receipt,
appropriation, realization or sale as aforesaid are insufficient to satisfy all
Obligations, Pledgors will be liable for the deficiency, together with interest
thereon at 12% per annum and the costs and reasonable expenses (including
attorneys' fees) incurred by Pledgee associated with its efforts to collect such
deficiency.
<PAGE>
(d) Notice.
Pledgee need not give more than ten (10) days' written notice of the time
and place of any public sale or of the time after which a private sale may take
place, and such notice shall be deemed to be reasonable notification of such
matters.
(e) Further Actions Upon Default.
Notwithstanding anything to the contrary contained herein, upon the
occurrence of a default by the Acquiree Shareholders upon any of their
Obligations contained in the Merger Agreement, which default would entitle
Pledgee to exercise its rights under subparagraphs 4(a)(iv) or 4(b)(ii) hereof,
Pledgee in its sole discretion shall be entitled to, without notice hereunder,
cause the Pledged Stock to be transferred into its name, into the name of any
purchaser, its nominee, to dispose of the Pledged Stock, to realize upon any and
all rights in the Pledged Stock then held by Pledgee, or to otherwise take any
actions with respect to the Pledged Stock. Except to the extent otherwise
prohibited by applicable law, in addition to any rights or remedies available in
law or equity and in addition to the provisions contained in any other agreement
relating to the Pledged Stock, Pledgee shall not be required to marshal the
Pledged Stock or any other security for or guarantee of the Obligations of
Pledgors or to resort to the Pledged Stock or any other security or guaranty in
any particular order and all of Pledgee's rights hereunder and under
any other agreements directly or indirectly related thereto shall be
cumulative. Furthermore, Pledgors do hereby agree to execute and deliver, or
cause to be executed and delivered such instruments, documents, assignments,
waivers, certificates, and affidavits and supply or cause to be supplied such
further information and take such further action as Pledgee shall require in
connection with any such transfer or sales of the Pledged Stock. However,
failure of Pledgors to cooperate in executing, delivering or causing to be
executed and delivered, such instruments, documents, assignments and the like,
shall not hereby affect the rights of Pledgee to act upon or otherwise cause the
Pledged Stock to be transferred, sold, disposed of hereunder.
5. Representations and Warranties.
Pledgors do hereby jointly and severally represent and warrant that:
(a) They have all requisite power and authority to enter into this
Agreement, to pledge the Pledged Stock for the purposes described herein, and to
carry out the transactions contemplated by this Stock Pledge Agreement and in
the Merger Agreement;
(b) They are the legal and beneficial owners of all of the Pledged Stock;
(c) The shares of the Pledged Stock constitute all of the issued and
outstanding shares of the issuer thereof owned or record by, beneficially owned
by, or owned in trust for Pledgors;
(d) All of the shares of the Pledged Stock have been duly and validly
issued, are fully paid and nonassessable and are owned by Pledgors free and
clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance or any
security interest in such shares or the proceeds thereof, except for the
security interest granted to Pledgee hereunder and except for any restrictions
upon resale that may exist under applicable federal or state securities laws;
(e) The execution, delivery and performance by Pledgors of this Stock
Pledge Agreement and the Merger Agreement will not result in any violation of
Pledgors' certificates of incorporation or by-laws (if any of Pledgors are
corporations), or constitute a default under the terms of any agreement,
indenture or other instrument, license, judgement, decree, order, law, statute,
ordinance or other governmental rule or regulation applicable to Pledgors or any
of their property; and
(f) Upon delivery of the Pledged Stock to Pledgee or an agent for Pledgee,
this Stock Pledge Agreement creates and grants a valid first lien on and
perfected security interest in the Pledged Stock and the proceeds thereof,
subject to no prior security interest, lien, charge or encumbrance, or to any
agreement purporting to grant to any third party security interest in the
Property or assets of Pledgors which would include the Pledged Stock.
<PAGE>
6. Covenants of Pledgors.
(a) Pledgors hereby covenant that, until all Obligations shall be satisfied
in full, they will not sell, convey, or otherwise dispose of any of the Pledged
Stock or any interest therein; nor will Pledgors create, incur or permit to
exist any pledge, mortgage, lien, charge, encumbrance or any security interest
whatsoever with respect to any of the Pledged Stock or the proceeds thereof
other than that created hereby.
(b) Pledgors warrant and will, at their own expense, defend Pledgee's
right, title, and security interest in and to the Pledged Stock against the
claims of any other person, firm, corporation or other entity.
(c) Pledgors acknowledge that a breach of any of the covenants contained in
Paragraph 6(a) above may cause irreparable injury to Pledgee; that Pledgee will
be so injured and, as a consequence, that Pledgors' covenants in Paragraph 6(a)
shall be specially enforceable against Pledgors; and Pledgors hereby waive, to
the extent such waiver is enforceable under law, and shall not assert, any
defenses against an action for specific performance of such covenants.
(e) Pledgors will promptly give or cause to be given written notice to
Pledgee of any notices received by it with respect to Pledged Stock registered
in the name of the Pledgors and Pledgee will promptly give like notice to
Pledgors of any notices received by it with respect to Pledged Stock registered
in the name of Pledgee or its nominee, if any. 7. Further Acts.
Pledgors shall at all times, and from time to time, upon the written
request of Pledgee, execute and deliver such further documents and do such
further acts and things as Pledgee may reasonably request to effect the purposes
of this Agreement including, but without limitation, delivering to Pledgee upon
request irrevocable proxies in respect of the Pledged Stock in form satisfactory
to Pledgee. Until receipt thereof, this Agreement shall constitute Pledgors'
proxy to Pledgee or its nominee to vote all shares of the Pledged Stock then
registered in Pledgors' names.
8. Term.
The term of this Pledge Agreement shall be for a period of three years and
three months from the Closing Date of the Merger. Upon the expiration of the
term hereof, the then remaining shares of Pledged Stock, if any, shall be
delivered on behalf of Pledgors to the trustee (the "Trustee") identified in
that Voting Trust Agreement attached as Exhibit "C" to the Merger Agreement,
whereupon such Pledged Stock shall continue to be held pursuant to the terms of
such Voting Trust Agreement. All other funds or distributions heretofore held on
behalf of Pledgors shall be returned to them on a pro-rata basis in accordance
with their Allocable Shares. By execution of this Stock Pledge Agreement,
Pledgors do hereby irrevocably constitute, appoint and direct Pledgee as their
Attorney-in- fact to deliver the remaining shares of Pledge Stock to the Trustee
upon the expiration of the term hereof.
9. Miscellaneous.
(a) Beyond the exercise of reasonable care to assure the safe custody of
the Pledged Stock while held hereunder, Pledgee shall have no duty or liability
to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it or tendering surrender
of it to Pledgors.
(b) No course of dealing between Pledgors and Pledgee, nor any failure to
exercise, nor any delay in exercising, on the part of Pledgee, any right, power
or privilege hereunder or under the Merger Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(d) The provisions of this Stock Pledge Agreement are severable and if any
clause or provisions shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall effect only
such clause or provision or part thereof in such jurisdiction and shall not in
any manner effect such clause or provision in any other jurisdiction or any
other clause or provision in this Stock Pledge Agreement in any jurisdiction.
<PAGE>
(e) This Stock Pledge Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10. Notices.
Any notice required or permitted by this Stock Pledge Agreement shall be
effective if given in accordance with the provisions of the Merger Agreement.
11. Binding Agreement.
This Stock Pledge Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the parties hereto.
12. Choice of Law.
This Stock Pledge Agreement shall be construed in accordance with the laws
of the Commonwealth of Pennsylvania with regard to principles of conflicts of
laws and is intended to take effect as an instrument under seal. Pledgors
acknowledge the jurisdiction of the state and Federal courts located in
Pennsylvania.
<PAGE>
(THIS SPACE LEFT BLANK INTENTIONALLY)
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<PAGE>
\PHILA2\69790_2
IN WITNESS WHEREOF, Pledgors have duly executed this Stock Pledge Agreement
to the day and year first above written and has hereunto set hand and seal.
PLEDGORS
_/s/ Joseph A. Marubbio___________________
Joseph A. Marubbio
/s/ Paula Marubbio___________________________
Paula Marubbio
/s/ Robert L. Starer_________________________
Robert L. Starer
/s/ Merle A. Starer________________________
Merle A. Starer
/s/ James R. Affleck, Jr.___________________
James R. Affleck, Jr.
/s/ Sarah B. Affleck_________________________
Sarah B. Affleck
ATTEST RCM TECHNOLOGIES, INC.
BY:/s/Stanton Remer_____________ BY:/s/ Leon Kopyt___________________
ATTEST CI ACQUISITION CORP.
BY:/s/ Stanton Remer____________ BY:/s/ Leon Kopyt______________________
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