UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30 , 1996
Commission file number: 1-10245
RCM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-1480559
(State of Incorporation) (IRS Employer Identification No.)
2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613
(Address of principal executive offices)
(609) 486-1777
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS 4,872,776
Common Stock, $.05 par value Outstanding as of June 5, 1996
1
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 1 - Consolidated Financial Statements
Page
Consolidated Balance Sheets as of April 30, 1996 (Unaudited)
and October 31, 1995 (Audited) 3
Unaudited Consolidated Statements of Income for the Six Month
Periods Ended April 30, 1996 and 1995 5
Unaudited Consolidated Statements of Income for the Three Month 6
Periods Ended April 30, 1996 and 1995
Unaudited Consolidated Statement of Changes in Shareholders'
Equity for the Six Month Period Ended April 30, 1996 7
Unaudited Consolidated Statements of Cash Flows for the Six
Month Periods Ended April 30, 1996 and 1995 8
Notes to Unaudited Consolidated Financial Statements 10
ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 16
ITEM 4 - Submission of Matters to a Vote of Security Holders 16
ITEM 6 - Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 1996 and October 31, 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
(Unaudited) (Audited)
Current assets
<S> <C> <C>
Cash and cash equivalents $ 70,078 $ 297,550
Accounts receivable, net of allowance for doubtful accounts
of $35,000 in 1996 and $15,000 in 1995 12,007,509 5,133,662
Prepaid expenses and other current assets 744,004 671,662
------- -------
Total current assets 12,821,591 6,102,874
---------- ---------
Property and equipment, at cost
Equipment and leasehold improvements 1,650,262 1,208,317
Less: accumulated depreciation and amortization 1,174,634 763,966
--------- -------
475,628 444,351
------- -------
Other assets
Deposits 95,269 43,074
Intangible assets (net of accumulated amortization
of $233,329 and $73,492 in 1996 and 1995,
respectively) 9,592,906 3,711,256
--------- ---------
9,688,175 3,754,330
--------- ---------
Total assets $22,985,394 $10,301,555
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
April 30, 1996 and October 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
---- ----
(Unaudited) (Audited)
Current liabilities
<S> <C> <C>
Note payable - bank $3,093,218 $914,435
Current maturities of long-term debt 77,887 111,945
Accounts payable and accrued expenses 606,880 340,072
Accrued payroll 2,437,641 1,182,934
Taxes other than income taxes 720,534 205,494
Income taxes payable 577,924
--------- ---------
Total current liabilities 7,514,084 2,754,880
--------- ---------
Long term liabilities
Note payable 20,090
Income taxes payable 673,716
------- ------
673,716 20,090
------- ------
Shareholders' equity
Preferred stock, $1.00 par value; 5,000,000 shares authorized;
no shares issued or outstanding
Common stock, $0.05 par value; 40,000,000 shares authorized; 4,872,776 and
3,255,024 shares issued in 1996 and
1995, respectively 243,639 162,751
Additional paid-in capital 17,218,214 10,916,692
Treasury stock, at cost 62,800 shares ( 62,821) ( 62,821)
Accumulated deficit ( 2,601,438) ( 3,490,037)
----------- ----------
14,797,594 7,526,585
---------- ---------
Total liabilities and shareholders' equity $22,985,394 $10,301,555
========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended April 30,
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues $23,562,110 $12,972,928
---------- ----------
Operating costs and expenses
Cost of services 19,298,075 10,667,153
Selling, general and administrative 3,082,700 1,741,901
Depreciation and amortization 132,470 62,818
------- ------
22,513,245 12,471,872
Operating income 1,048,865 501,056
--------- -------
Other income (expense)
Interest expense ( 51,089) ( 13,492)
Other, net 73,418
------ ------
( 51,089) 59,926
------ ------
Income before income taxes 997,776 560,982
Income taxes 109,177 54,243
------- ------
Net income $888,599 $506,739
======= =======
Net income per share $.24 $.17
=== ===
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended April 30,
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues $13,785,626 $6,280,172
---------- ---------
Operating costs and expenses
Cost of services 11,312,200 5,124,759
Selling, general and administrative 1,931,739 863,790
Depreciation and amortization 80,453 31,409
------ ------
13,324,392 6,019,958
---------- ---------
Operating income 461,234 260,214
------- -------
Other Income (expense)
Interest expense ( 26,249) ( 7,343)
Other, net 51,846
------ ------
( 26,249) 44,503
------ ------
Income before income taxes 434,985 304,717
Income taxes 48,249 26,993
------ ------
Net income $386,736 $277,724
======= =======
Net income per share $.09 $.05
=== ===
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six Months Ended April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Treasury
Shares Amount Capital Deficit Stock
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1995 3,255,024 $ 162,751 $10,916,692 ($3,490,037) ($ 62,821)
Exercise of Stock Options 6,800 340 4,473
Issuance of Common Stock
in connection with acquisitions 1,334,327 66,716 5,310,881
Sale of Common Stock 276,625 13,832 986,168
Net Income 888,599
------- ------ ------- ------- ------
Balance, April 30, 1996 4,872,776 $ 243,639 $17,218,214 ($2,601,438) ($ 62,821)
=========== =========== =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended April 30,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $888,599 $506,739
------- -------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 132,470 62,818
Provision for losses on accounts
receivable 20,000 ( 6,821)
Changes in assets and liabilities:
Accounts receivable (1,222,227) 561,597
Prepaid expenses and other
current assets 178,503 ( 273,875)
Accounts payable and accrued expenses ( 192,456) 151,595
Accrued payroll ( 9,283) ( 198,083)
Billings in excess of costs and
estimated earnings ( 55,694)
Taxes other than income taxes 268,855 ( 48,127)
Income taxes payable ( 431,314) ( 67,623)
------- ------
Total adjustments (1,255,452) 125,787
--------- -------
Net cash provided by (used in) operating activities ( 366,853) 632,526
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements
8
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Six Months Ended April 30,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from investing activities:
<S> <C> <C>
Increase in Intangible assets ( 587,337) ($ 10,000)
Property and equipment acquired ( 46,835) ( 51,337)
Increase in deposits ( 30,546) 2,584
Cash paid for acquisitions,
net of cash acquired ( 621,500)
------- ------
Net cash used in investing activities ( 1,286,218) ( 58,753)
--------- ------
Cash flows from financing activities:
Sale of common stock 1,000,000
Exercise of stock options 4,813
Net borrowings under short term debt arrangements 460,966
Repayments of long term debt ( 40,180) ( 36,433)
------ ------
Net cash provided by (used in) financing activities 1,425,599 ( 36,433)
--------- ------
Net increase (decrease) in cash and cash equivalents ( 227,472) 537,340
Cash and cash equivalents at beginning of period 297,550 2,534,073
------- ---------
Cash and cash equivalents at April 30, $ 70,078 $ 3,071,413
============= ===========
Supplemental cash flow information:
Cash paid for:
Interest expense $ 51,089 $ 13,492
Income taxes $ 135,000 $ 137,781
</TABLE>
The accompanying notes are an integral part of these
financial statements.
9
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). This Report on Form 10-Q should be read in
conjunction with the Company's annual report on Form 10-K for the year
ended October 31, 1995. 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 six months ended April 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
2. Stock Split
The Board of Directors, with stockholder approval, amended the Company's
Articles of Incorporation to effect a one-for-five reverse split of common
stock whereby each five shares of common stock were exchanged for one share
of common stock. The amendment had no effect on the number of authorized
shares and the par value of the common stock. Where fractional shares
resulted from the reverse split, the Company issued such additional
fraction of a share as is necessary to increase the fractional share to a
full share.
All references in the financial statements to weighted average number of
shares outstanding, earnings per share amounts and stock option data has
been restated to reflect the reverse split.
3. Income per Share
Income per share is based on the weighted average number of common shares
outstanding during the periods stated. For the six months ended April 30,
1996 and 1995, the weighted average number of shares outstanding was
3,776,035 and 2,914,072, respectively.
4. Sale of Common Stock
On February 5, 1996, the Company issued and sold 276,625 shares of common
stock to Limeport Investments, L.L.C. in a Private Placement transaction
for $1,000,000 ($3.615 per share). The purchase price was based on a twenty
percent discount to the twenty day average closing price prior to the
purchase of the shares. The shares are restricted securities, however, the
Company has agreed to register such shares by filing a shelf registration
statement by February 15, 1997. The President of the Company, Leon Kopyt,
has been granted certain voting rights over these shares as long as they
remain owned by Limeport Investments, L.L.C..
10
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5. Acquisitions
During the six months ended April 30, 1996, the Company acquired two
businesses in the staffing services industry. These acquisitions, which are
described below, have been accounted for as purchases and, accordingly, the
results of operations of the acquired companies have been included in the
consolidated results of operations of the Company from the date of
acquisition.
On March 11, 1996, the Company acquired all of the outstanding shares of
The Consortium, a speciality provider of information technology and health
care personnel servicing private sector and government clients in the
greater metropolitan New York region.
The consideration paid to the former shareholders of The Consortium
consisted of 1.3 million restricted shares of its common stock, valued at
$5,000,000, (based upon the average closing price of the Company's common
stock for the 20 trading days immediately preceding the closing date) in
exchange for all of the outstanding capital stock of The Consortium. The
company has agreed to file a shelf registration statement by February 15,
1997, permitting the sale of $600,000 in value of securities during the
period April 1997 through March 1998. Thereafter, the remainder of these
shares are subject to significant restrictions on resale through March 11,
1999. The cost in excess of net assets acquired of $4,851,500 is included
in the Company's Consolidated Balance Sheet as "Intangible Assets" and
is being amortized over a 40 year period.
On May 1, 1996, the Company acquired The Consortium of Maryland, Inc.
("Consort MD"), a specialty provider of information technology personnel
services to major U.S. Corporations in the greater metropolitan Washington,
D.C. region. Consort MD was not related or affiliated with The Consortium.
The acquisition was completed through a merger transaction (the "Merger")
pursuant to which Consort MD was merged with and into a newly-created
subsidiary of the Company, which then concurrently changed its name to "The
Consortium of Maryland, Inc."
The Merger consideration paid to the former shareholder of Consort MD at
the closing consisted of $621,500 cash and 34,327 restricted shares of the
Company's common stock valued at $377,597 (based upon the average closing
bid price of the Company's common stock for the 20 trading days immediately
preceding the closing date). Additional merger consideration will be paid
to the former shareholder of Consort MD consisting of additional shares of
stock and cash having a value equal to the tangible net worth of the
Consort MD as of the Merger date. As of the date of this report, the
tangible net worth has not been determined. It is anticipated that this
amount will be paid by June 15, 1996. The Company has agreed to file a
registration statement by May 1, 1998 permitting the sale of the restricted
shares.
11
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5. Acquisitions - Continued
The following unaudited results of operations have been prepared assuming
the acquisitions had occurred as of the beginning of the periods presented.
Those results are not necessarily indicative of results of future
operations nor of results that would have occurred had the 1996
acquisitions been consummated as of the beginning of the periods presented.
<TABLE>
<CAPTION>
Six Months Ended April 30,
1996 1995
-------------- ---------
<S> <C> <C>
Revenues $ 35,538,000 $ 28,480,000
Net income $ 1,301,500 $ 979,000
Income per share $ .28 $ .23
</TABLE>
6. Shareholder Rights Plan
On March 14, 1996, the Board of Directors of the Company declared a
dividend distribution of one Common Share Purchase Right ("Right") for each
outstanding share of common stock of the Company. Each Right entitles
stockholders to buy one share of common stock at an exercise price of
$3.00. The Rights will be exercisable only if a person or group acquires
15% or more of the Company's common stock or announces a tender offer the
consummation of which would result in ownership by a person or group of 15%
or more of the common stock. The Company will be entitled to redeem the
rights at one cent per Right at any time before a 15% or greater position
has been acquired.
The dividend distribution was made on April 1, 1996, payable to
shareholders of record at the close of the business on that date. The
Rights expire April 1, 2006.
12
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
During the six months ended April 30, 1996, working capital increased
$1,960,000. This was due primarily to the increased levels of profitability of
the Company and the private placement of common stock for $1,000,000. At April
30, 1996, the Company had outstanding borrowings under its credit facility of
$3,093,218 as compared to $914,435 as of October 31, 1995, an increase of
$2,178,783. The Company, at April 30, 1996, had $673,716 in long term
liabilities and held $70,000 in cash along with $2,906,782 of loan availability
on its $6,000,000 line of credit. (Increased to $10,000,000 on May 29, 1996).
In 1996, operating activities used $366,853 of cash compared to cash provided by
operating activities of $632,526 in 1995. The decrease of $999,379 was primarily
attributable to increased levels of accounts receivable during the six months
ended April 30, 1995 compared to the six months ended April 30, 1995.
Cash used for investing activities totaled $1,286,218 in 1996 compared to
$58,753 in 1995. The increase was primarily attributable to cash payments for
acquisitions and related intangible assets.
Cash provided by financing activities was $1,425,599 in 1996 compared to a use
of cash of $36,433 in 1995. The increase was attributable to the private
placement of common stock for $1,000,000 and the proceeds from short term
borrowings.
On May 29, 1996, the Company and its subsidiaries entered into an amended and
restated agreement with Mellon Bank, N.A. for providing a credit facility in the
maximum amount of $10,000,000. The agreement expires on June 30, 1998. The
credit facility is collateralized by accounts receivable, contract rights and
furniture and fixtures with unlimited guarantees from the Company. The credit
facility requires the subsidiaries and the Company to meet certain objectives
with respect to financial ratios and earnings. Credit facility advances are to
be used to meet cash flow requirements for the subsidiaries as well as operating
expenses for the Company. Advances to the Company in excess of its operating
expenses must have prior bank approval. The Company believes its present credit
facility will sufficiently support its operations and those of its subsidiaries.
Borrowing under the credit facility is based on 85% of accounts receivable on
which not more than ninety days have elapsed since the date of invoicing. The
interest rate charged is the prime rate of the bank (effective rate of 8.25% and
8.75% at April 30, 1996 and October 31, 1995, respectively). The bank charges a
fee of .25% per annum on the unused portion of the credit facility.
The Company's liquidity and capital resources may be effected in the future as
the Company continues to grow through an aggressive acquisition strategy.
The Company does not currently have material commitments for capital
expenditures and does not anticipate entering into any such commitments during
the next twelve months. The Company continues to evaluate acquisitions of
various businesses which are complementary to its current operations. The
Company's current commitments consist primarily of lease obligations for office
space. The Company believes that its capital resources are sufficient to meet
its obligations incurred in the normal course of business for at least the next
twelve months.
13
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Results of Operations
Six Months Ended April 30, 1996 Compared to April 30, 1995
Summary. Revenues, gross profit, operating income and net income of the Company
for the 1996 period increased $10.6 million (81.6%), $2.0 million (85.7%), $.5
million (109.3%), and $.4 million (75.3%), respectively, compared with 1995.
These improvements were primarily due to the acquisitions of Cataract, Inc.
(August 30, 1995) and The Consortium (March 11, 1996).
As a result of the aforementioned acquisitions, the Company is able to spread
its fixed expenses over a larger revenue base, as well as, management's ability
to control expenses during a period of revenue growth.
Results of operations for the six months ended April 30, 1996 reflected a net
income of $888,599 ($.24 per share) as compared to $506,739 ($.17 per share) for
the six months ended April 30, 1995.
Cost of services increased by $8.6 million to $19.3 million or 80.7% for the six
months ended April 30, 1996 compared to $10.7 million for the six months ended
April 30, 1995. This increase resulted from increased sales in 1996.
Gross profit increased by 2.0 million to 4.3 million, or 85.7% for the six
months ended April 30, 1996 compared to the six months ended April 30, 1995.
Gross profit as a percentage of revenues was 18.1% for 1996 and 17.7% for 1995.
The increased gross profit percentages resulted from improved pricing margins.
Selling, general and administrative expenses (SG&A) increased 1.3 million to 3.1
million or 13.1% of revenues for the six months ended April 30, 1996 as compared
to 13.4% of revenues for the six months ended April 30, 1995. The increased SG&A
was principally attributable to the aforementioned acquisitions. The decreased
SG&A as a percentage of revenues was attributable to continuing implementation
of Company efforts to increase operational efficiencies and the ability to
spread fixed administrative expenses over a larger revenue base.
Depreciation and amortization increased by $69,652 to $132,470 for the six
months ended April 30, 1996, compared to $62,818 for the six months ended April
30, 1995. This increase was attributable to the amortization of intangible
assets incurred with the aforementioned acquisitions.
Interest expense increased by $37,597 to $51,089 for the six months ended April
30, 1996, compared to $13,492 for the six months ended April 30, 1995. This
increase was attributable to funds required for acquisitions as well as the
refinancing of acquired companies working capital debt and term debt to more
favorable terms and conditions available under the Company's line of credit
facility.
Income tax expense increased by $54,934 to $109,177 for the six months ended
April 30, 1996, compared to $54,243 for the six months ended April 30, 1995.
This increase was attributable to the higher level of profitability for 1996.
14
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Results of Operations
Three Months Ended April 30, 1996 compared to April 30, 1995
Summary. Revenues, gross profit, operating income and net income of the Company
for the 1996 period increased $7.5 million (120.0%), 1.3 million (114.1%), $.2
million (77.3%), and $.1 million (39.3%), respectively, compared with 1995.
These improvements were primarily due to the acquisitions of Cataract, Inc.
(August 30, 1995) and The Consortium (March 11, 1996).
Results of operations for the three months ended April 30, 1996 reflected a net
income of $386,736 ($.09 per share) as compared to $277,724 ($.05 per share) for
the three months ended April 30, 1995.
Cost of services increased by 6.2 million to $11.3 million or 120.7% for the
three months ended April 30, 1996 compared to 5.1 million for the three months
ended April 30, 1995. This increase resulted from increased sales in 1996.
Gross profit increased by 1.3 million to 2.4 million, or 114.1% for the three
months ended April 30, 1996 compared to 1.2 million for the three months ended
April 30, 1995. Gross profit as a percentage of revenues was 17.9% for 1996 and
18.4% for 1995.
Selling, general and administrative expenses (SG&A) increased 1.1 million to 1.9
million or 14.1% of revenues for the three months ended April 30, 1996. The
increased SG&A was principally attributable to the aforementioned acquisitions.
The increased SG&A as a percentage of revenues (1996-14.1%; 1995-13.8%) was
attributable to one time charges incurred in connection with the reverse stock
split and the implementation of a shareholder rights plan.
Depreciation and amortization increased by $49,044 to $80,453 for the three
months ended April 30, 1996, compared to $31,409 for the three months ended
April 30, 1995. This increase was attributable to the amortization of intangible
assets incurred with the aforementioned acquisitions.
Interest expense increased by $18,906 to $26,249 for the three months ended
April 30, 1996, compared to $7,343 for the three months ended April 30, 1995.
This increase was attributable to funds required for acquisitions as well as the
refinancing of acquired companies working capital and term debt to more
favorable terms and conditions available under the Company's line of credit
facility.
Other, net consisted principally of interest income for the three months ended
April 30, 1995. Interest income declined to $-0- for the three months ended
April 30, 1996. This decline resulted from the increased working capital
requirements necessary to support $12,007,509 of accounts receivable at April
30, 1996.
Income tax expense increased by $21,256 to $48,249 for the three months ended
April 30, 1996, compared to $26,993 for the three months ended April 30, 1995.
This increase was attributable to the higher level of profitability for 1996.
15
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Other than as reported in Part I, Item 3 - "Legal Proceedings" of the
Company's Annual Report on Form 10-K for the year ended October 31,
1995, there have been no material developments to any of the matters
that require reporting under this Item.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on March 29, 1996.
The following actions were taken:
1.) The following directors were elected to serve on the Board of
Directors until the expiration of their respective terms and
until their respective successors shall be elected and
qualified. Tabulated voting results were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Leon Kopyt (Class C) (For 13,250,328; Withheld 963,386)
Stanton Remer (Class C) (For 13,283,747; Withheld 929,967)
Norman S. Berson (Class A) (For 13,282,947; Withheld 930,767)
Robert B. Kerr (Class B) (For 13,282,847; Withheld 930,867)
Woodrow B. Moats, Jr. (Class B) (For 13,283,747; Withheld 929,967)
</TABLE>
Each nominee as a Class A, Class B and Class C director was
elected to serve a term expiring at the Company's Annual
Meeting in 1997, 1998 and 1999, respectively, or until his
successor has been elected and qualified.
2.) Amendment of the Articles of Incorporation to effect a reverse
split of the Company's issued and outstanding common stock on
the basis that each five (5) shares then outstanding will be
converted into one (1) share.
Votes For - 12,519,738; Votes Against - 1,357,123
3.) Amendment of the Articles of Incorporation to authorize the
Board of Directors to issue up to 5,000,000 shares of
preferred stock having such rights, privileges, designations
and preferences as may be determined by the Board of
Directors.
Votes For - 8,368,576; Votes Against - 1,736,989
4.) Amendment of the Articles of Incorporation to permit the
shareholders to adopt, amend or repeal the Company's Bylaws in
the same manner as amendments to the Articles of
Incorporation.
Votes For - 10,547,395; Votes Against - 3,020,289
5.) Approval of Grant Thornton, LLP as the independent auditing
firm for the Company for the fiscal year ending October 31,
1996.
Votes For - 13,916,486; Votes Against - 157,344
Item 5. Other Information
None.
16
<PAGE>
PART II
OTHER INFORMATION - CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
( 2 ) Stock Purchase Agreement, dated April 23, 1996, between RCM Technologies, Inc., Sort
Acquisition Corp., The Consortium of Maryland, Inc. and Peter Kaminsky.
(11) Computation of earnings per share.
(27) Financial Data Schedule.
(10.1) Registration Rights Agreement, dated May 2, 1996, between RCM Technologies, Inc. and
Peter Kaminsky.
(10.2) Escrow Agreement, dated May 2, 1996, between RCM Technologies, Inc. and Peter Kaminsky
and Norman S. Berson, as escrow agent.
(10.3) Standstill and Shareholders Agreement, dated May 2, 1996, between RCM Technologies, Inc.
and Peter Kaminsky.
(10.4) Employment Agreement, dated May 2, 1996, between The Consortium of Maryland, Inc. and
Peter Kaminsky.
</TABLE>
(b) Reports on Form 8-K
A report on Form 8-K was filed with the Securities & Exchange
Commission on March 20, 1996 relating to the acquisition of The
Consortium, pursuant to which The Consortium, through an exchange of
all its outstanding shares of stock with the Registrant, became a
wholly-owned subsidiary of the Registrant.
A report on Form 8-K was filed with the Securities & Exchange
Commission on March 22, 1996 relating to the Stockholder Rights Plan
approved by the Board of Directors on March 14, 1996.
17
<PAGE>
RCM TECHNOLOGIES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
RCM Technologies, Inc.
(Registrant)
Date: June 05, 1996 By:/s/ Leon Kopyt
--------------
Leon Kopyt
Chairman, President, Chief Executive Officer
and Director
Date: June 05, 1996 By:/s/ Stanton Remer
-----------------
Stanton Remer
Chief Financial Officer, Treasurer, Secretary
and Director
18
EXHIBIT 11
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Six Months Ended April 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months Ended April 30,
--------------------------
1996 1995
---- ----
Income
<S> <C> <C>
Net income applicable to common stock $ 888,599 $ 506,739
======= =======
Shares
Weighted average number of shares
outstanding 3,708,221 2,879,913
Common stock equivalents 67,814 34,159
------ ------
Total 3,776,035 2,914,072
========== =========
Primary earnings per share $ .24 $ .17
=== ===
Fully diluted earnings per share $ .24 $ .17
=== ===
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE SUMMARY FINANCIAL INFORMATION IS EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATMENTS
</LEGEND>
<CIK> 0000700841
<NAME> RCM TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 70,078
<SECURITIES> 0
<RECEIVABLES> 12,042,509
<ALLOWANCES> 35,000
<INVENTORY> 0
<CURRENT-ASSETS> 12,821,591
<PP&E> 1,650,262
<DEPRECIATION> 1,174,634
<TOTAL-ASSETS> 22,985,394
<CURRENT-LIABILITIES> 7,514,084
<BONDS> 0
0
0
<COMMON> 243,639
<OTHER-SE> 14,553,955
<TOTAL-LIABILITY-AND-EQUITY> 14,797,594
<SALES> 23,562,110
<TOTAL-REVENUES> 23,562,110
<CGS> 19,298,075
<TOTAL-COSTS> 22,513,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,089
<INCOME-PRETAX> 997,776
<INCOME-TAX> 109,177
<INCOME-CONTINUING> 888,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 888,599
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
MERGER AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
SORT ACQUISITION CORP.
THE CONSORTIUM OF MARYLAND, INC.
AND
PETER KAMINSKY
Dated as of April 23, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. RECITALS AND DEFINITIONS............................................................................... 1
2. MERGER AND MERGER CONSIDERATION........................................................................ 3
3. DELIVERY OF ACQUIREE SHARES............................................................................. 6
4. REPRESENTATIONS AND WARRANTIES OF ACQUIREE
AND Shareholder......................................................................................... 6
5. REPRESENTATIONS AND WARRANTIES OF RCM AND ACQUIROR..................................................... 16
6. COVENANTS OF THE PARTIES TO THIS AGREEMENT............................................................. 19
7. THE CLOSING............................................................................................ 25
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE
AND SHAREHOLDER........................................................................................ 28
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM
AND ACQUIROR. ........................................................................................ 30
10. INDEMNIFICATION........................................................................................ 32
11. TERMINATION.............................................................................................34
12. NOTICES.................................................................................................34
13. ARBITRATION.............................................................................................36
14. MISCELLANEOUS...........................................................................................36
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIST OF SCHEDULES
<S> <C>
4(b) Financial Statements of Acquiree
4(e) Accounts Receivable of Acquiree as of December 31, 1995
4(f) Material adverse changes
4(g) Litigation
4(i) Articles of Incorporation, Bylaws and Contracts of Acquiree
4(j) Tax information
4(k) All material Contracts and Agreements
4(l) Liens, encumbrances and general description of all real property in which Acquiree has an ownership
interest
4(m) Licenses, trademarks and trade names
4(n) Consents
4(t) Number of employees, names and addresses and total compensation of all directors and officers of
Acquiree - identifies all employee benefit plans
4(u) Compliance with environmental and conservation laws
4(w) List of all insurance policies
4(x) List of all bank accounts maintained or for the benefit of Acquiree
4(y) List of 10 largest customers of Acquiree, based on dollar volume of income for Fiscal 1995
5(a) Articles of Incorporation and Bylaws of Acquiror
5(b) Articles of Incorporation and Bylaws of RCM
5(e) Subsidiaries of Acquiror
</TABLE>
<PAGE>
LIST OF EXHIBITS
Exhibit "A" Articles of Merger
Exhibit "B" Escrow Agreement
Exhibit "C" Investor Representation Letter
Exhibit "D" Registration Rights Agreement
Exhibit "E" Standstill and Shareholders Agreement
Exhibit "F" Kaminsky Employment Agreement
Exhibit "G" Documents pertaining to Escrow Arrangements
(Closing Agreement, Stock Pledge Agreement, Mutual Release and
Settlement Agreement,Consortium Billof Sale, Astra Bill of Sale,Promissory Note,
Payment Guarantee and S Corporation Election)
<PAGE>
39
AGREEMENT AND PLAN OF MERGER
THIS MERGER AGREEMENT (the "Agreement" ) is made and entered into
as of this 23rd day of April 1996, by and among RCM Technologies, Inc., a Nevada
corporation ("RCM"); Sort Acquisition Corp., a Pennsylvania corporation (the
"Acquiror"); The Consortium of Maryland, Inc., a Maryland corporation (the
"Acquiree"); and Peter Kaminsky as sole shareholder of Acquiree (the
"Shareholder").
RECITALS:
A. Subject to the escrow and pledge provisions identified at
paragraph 3 hereafter, Shareholder owns 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. 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
considerations and the issuance to Shareholder of shares of RCM's authorized but
unissued common stock to the extent and in the manner set forth below (the
"Merger"); (ii) the common stock of RCM issued in connection with the Merger
shall be deemed "restricted securities" pursuant to Rule 144, promulgated under
the Securities Act of 1933, as amended (the "Act"); and (iii) the Common Stock
of RCM issued in connection with the Merger shall be subject to a registration
rights agreement as provided in Exhibit D to this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound, hereby agree as
follows:
1. 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 - The Consortium of Maryland, Inc., a Maryland corporation.
Acquiror - Sort Acquisition Corp., a Pennsylvania corporation.
Articles of
Merger- the articles of merger which are required to be filed in accordance
with Section 2.1.
Code - the Internal Revenue Code of 1986, as amended.
Closing - the transaction of events set forth in Section 7 hereof.
Closing Date - the day on which the Closing is held as set forth in Section 7.1
hereof.
Closing
Financial
Statements - Unaudited financial statements of
Acquiree for the interim period from
January 1, 1996 through April 30,
1996.
Escrow
Shares - that portion of the Merger Shares delivered to escrow pursuant to
Section 2.3.
Exchange Act - the Securities Exchange Act of 1934, as
amended.
Financial
Statements - reviewed financial statements of
the Acquiree for the fiscal years
ended December 31, 1995 and December
31, 1994, and December 31, 1993
prepared in compliance with
generally accepted accounting
principles consistently applied
throughout such periods.
Interim
Financial
Statements - Unaudited financial statements of
the Acquiree for the interim period
from January 1, 1996 through March
31, 1996.
Merger - the merger of the Acquiree with and into
the Acquiror as provided in this Agreement.
Merger
Consideration- the Merger Shares and cash
consideration to be received by
Shareholder pursuant to the Merger.
Merger Shares- shares of RCM Common Stock
to be issued to Shareholder pursuant
to the terms of this Merger
Agreement.
RCM - RCM Technologies, Inc., a Nevada corporation.
RCM Common Stock - common stock, $.05 par value per share, of RCM.
Shareholder - Peter Kaminsky, as sole shareholder of Acquiree.
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,
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 Maryland Business Corporation Act (the "MBCA") 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, "THE CONSORTIUM OF MARYLAND, 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 Secretaries of State of the
Commonwealth of Pennsylvania and State of Maryland in accordance with the PBCL
and MBCA. The Articles of Merger shall be filed by the appropriate parties
thereto on the Closing Date. The date and time when the Merger shall become
effective is referred to herein 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 "THE CONSORTIUM OF MARYLAND, 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, Acquiror and RCM shall execute and deliver, and file
or caused to be filed with the Secretaries of State of the Commonwealth of
Pennsylvania and the State of Maryland 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
(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, Shareholder shall be entitled to receive immediately
therefor, and RCM shall cause to be issued or paid, as the case may be: (i) the
number of Merger Shares which as of the Closing Date have a valuation equal to
Three Hundred Seventy Eight Thousand Five Hundred Dollars ($378,500); and (ii)
the sum of Six Hundred Twenty One Thousand Five Hundred Dollars ($621,500) in
immediately available funds;
(b) Within thirty (30) days of the Closing Date, RCM and Shareholder shall
cause to be prepared to their mutual satisfaction the Closing Financial
Statements. Within ten (10) days of the delivery of satisfactory Closing
Financial Statements to RCM and Shareholder, RCM shall cause to be delivered or
paid to the Shareholder, as the case may be, additional Merger Shares and cash
consideration which in the aggregate have a value equal to the "Tangible Net
Worth" (as defined at subparagraph (c) below) of Acquiree as of the Closing
Date, in the following manner: (i) the first $243,000 of value shall be payable
to the Shareholder by delivery to the Shareholder of additional Merger Shares
which had as of the Closing Date a valuation of $243,000; (ii) the remainder of
the "Tangible Net Worth" shall be paid or delivered to Shareholder 50% by the
delivery of immediately available funds and 50% by delivery to the Shareholder
of additional Merger Shares which as of the Closing Date had such a valuation.
(c) For these purposes, 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 twenty (20) calendar day period immediately preceding the Closing
Date. Also, for these purposes, the term "Tangible Net Worth" of Acquiree shall
be calculated using the information contained in the Closing Financial
Statements and be defined as the total tangible assets of the Acquiree (as such
assets are included in the Closing Financial Statements in accordance with
generally accepted accounting principles, including, but not limited to, the
account receivables of Acquiree and excluding any receivables owed to the
Acquiree by the Shareholder or any other affiliated party) minus the total
liabilities of the Acquiree (including for this purpose any federal and state
tax liabilities that have been or may be accrued thereafter by virtue of the
change of Acquiree's method of accounting from cash to accrual).
2.3 Escrow Agreement. Shareholder shall upon the Closing Date deposit in
escrow 25% of the Merger Shares identified in paragraph 2.2(a) and shall upon
the receipt thereafter, deposit in escrow an additional 25% of the Merger Shares
identified in subparagraph 2.2(b) (in the aggregate, the "Escrow Shares")
pursuant to an escrow agreement in the form of Exhibit "B" attached hereto and
made a part hereof (the "Escrow Agreement"). The Escrow Shares shall be deemed
collateral for the indemnification obligations of Shareholder pursuant to
Section 10 of this Agreement.
3. Delivery of Acquiree Shares.
3.1 Acknowledgment of Escrow Arrangements. RCM and Acquiror are aware that
the Acquiree Shares are presently being held in escrow to serve as collateral
for the payment of a Promissory Note (the "Note") delivered by the Shareholder
to a former shareholder of Acquiree and that the Acquiree Shares of the
Shareholder and the former shareholder of Acquiree, which in the aggregate
constitute 100% of the outstanding capital stock of Acquiree, will only be
released from escrow upon satisfaction of the Note. The complete terms of this
arrangement (the "Escrow Arrangements") are contained within the Closing
Agreement, Stock Pledge Agreement, Mutual Release and Settlement Agreement,
Consortium Bill of Sale, Astra Bill of Sale, Promissory Note, Payment Guarantee
and S Corporation Election each of which is attached hereto and made a part
hereof as Exhibit G. It is the intention of the parties that at the Closing the
cash component of the Merger Consideration payable to pursuant to paragraph 2.2
hereof shall be delivered by RCM on behalf of the Shareholder to the Escrow
Agent identified in the Escrow Arrangements (the "Escrow Agent") in full
satisfaction of the requirements to deliver the cash component of the Merger
Consideration to the Shareholder, whereupon, the Escrow Agent shall release to
RCM and Acquiror 100% of the Acquiree Shares.
<PAGE>
3.2 Closing Deliveries.
Under and subject to the Escrow Arrangements identified above,
on the Closing Date Shareholder 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 Shareholder.
The Acquiree and Shareholder, jointly and severally, as a material inducement to
RCM and the Acquiror to enter into this Agreement and consummate the
transactions contemplated 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) Shareholder. Shareholder will be on the Closing Date, upon
satisfaction of the transactions contemplated by the documents contained in
Exhibit G, the sole owner, 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 and the financial
information contained herein will present fairly the financial condition of
Acquiree for the periods covered and have been prepared under the accrual method
of accounting 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
liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, that will not be shown or otherwise provided for in the Financial
Statements, 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) RCM Shares to Constitute Restricted Securities.
Shareholder represents and warrants: (a) that he has reviewed the quarterly,
annual and periodic reports of RCM, as filed by RCM with the SEC pursuant to the
Exchange Act, 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 risks of investing in the Merger Shares;
(b) that they have been advised that the Merger Shares to be issued to them by
RCM constitute "restricted securities" as defined in Rule 144 promulgated under
the Securities Act, and accordingly, have not been and will not be registered
under the Securities Act except as otherwise set forth in this Agreement or in
Exhibit D, and, therefore, that he may not be able to sell or otherwise dispose
of such Merger Shares except if the Merger Shares are subject to an effective
registration statement filed with the SEC, in compliance with Rule 144 or
otherwise pursuant to an exemption from registration under the Securities Act;
(c) that the Merger Shares so issued are being acquired by him for his own
benefit and on his own behalf for investment purposes and not with a view to, or
for resale in connection with, a public offering or re-distribution thereof; (d)
that the Merger Shares so issued will not be resold (i) without registration
thereof under the Securities Act (unless in the opinion of counsel acceptable to
RCM, an exemption from such registration is available) or (ii) in violation of
any law; and (e) that the certificate or certificates representing the Merger
Shares to be issued will be imprinted with a legend in form and substance as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF
EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE
COMPANY OR A NON-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION."
and RCM is hereby authorized to notify its transfer agent of the status of the
Merger Shares, and to take such other action including, but not limited to the
placing of a "Stop Transfer" order on the books and records of RCM's transfer
agent to insure compliance with the foregoing.
(e) Accounts Receivable. Attached hereto as Schedule 4(e) is a
list of all accounts receivable of Acquiree as of December 31, 1995 and aging
schedule pertaining thereto. All of the accounts receivable of Acquiree now and
on the Closing Date, are bona fide accounts receivable of Acquiree representing
the sales price of (or other sums or fees receivable for or in respect of)
goods, merchandise, or services sold or performed by Acquiree in valid
transactions in the regular course of its business to or for the benefit of its
customers. Such accounts receivable are not uncollectible or subject to offset
or counterclaim or otherwise in controversy.
(f) Materially Adverse Change. Except as set forth in Schedule
4(f), or as otherwise, specifically stated in this Agreement, since the date of
its financial statements as of, and for the period ended, December 31, 1995, to
the date of this Agreement, the business of the Acquiree has been operated in
the ordinary course and there has not been:
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 or at any time during such
period;
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,
except as otherwise permitted in Section 6(o)(xi)herein of S-Corp distributions,
or any direct or indirect redemption, purchase or other acquisition of any such
stock or any agreement to do so, except as contemplated by Exhibit G;
iv) Any issuance or sale by the Acquiree, or agreement by the Acquiree, or
Shareholder, to sell or pledge any of the Acquiree's securities, nor have any
irrevocable proxies been given with respect to the Acquiree's securities;
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 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.
(g) Litigation. Except as set forth in Schedule 4(g), there
are no actions, suits, claims, investigations or legal, administrative or
arbitration proceedings pending or, to the knowledge of the Acquiree or
Shareholder, 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 Shareholder know of any basis for any such action, suit, claim,
investigation or proceeding.
(h) Compliance: Governmental Authorizations. The Acquiree has
complied in all material respects with all federal, state, local or foreign
laws, ordinances, regulations and orders applicable to its business, including
without limitation, federal and state securities, banking collection and
consumer protection laws and regulations that, if not complied with, would
materially and adversely affect its businesses. The Acquiree has all federal,
state, local and foreign governmental licenses and permits necessary for the
conduct of its business. Such licenses and permits are in full force and effect.
Neither the Acquiree nor the Acquiree Shareholders knows of any violations of
any such licenses or permits. No proceedings are pending or threatened to revoke
or limit the use of such licenses or permits.
(i) Due Organization. The Acquiree is a corporation duly
organized, validly existing and good standing under the laws of the State of
Maryland; 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(i).
(j) Taxes. Except as disclosed on Schedule 4(j) 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; (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 Statements; 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. Except as disclosed on Schedule 4(j), there are no
outstanding agreements or waivers extending the statutory period of limitation
concerning any tax liability of Acquiree, no examination or audit 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.
(k) Agreements. Schedule 4(k) 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(k) have been or will have been made available to the 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(k). 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.
(l) 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(l), and (ii) liens for
current taxes not yet delinquent. Schedule 4(l) also contains a general
description of all real property in which Acquiree has an ownership interest.
Except as set forth in said Schedule 4(l) 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.
(m) Licenses; Trademarks: Trade Names. Except as set forth on Schedule
4(m), 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.
(n) Due Authorization. This Agreement has been duly
authorized, executed and delivered by the Acquiree and Shareholder and
constitutes a valid and binding agreement of the Acquiree and Shareholder,
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. Except as otherwise set forth
within the Escrow Arrangements, 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 or Shareholder is a party or by which the
Acquiree, Shareholder or their properties may be bound, or violate in any
material respect any statute, law, rule or regulation applicable to the Acquiree
or Shareholder, except that the consents disclosed on Schedule 4(n) will be
required as to the Merger pursuant to the terms of those scheduled agreements.
No consent or approval by any governmental authority is required in connection
with the execution and delivery by the Acquiree and Shareholder of this
Agreement or the consummation of the transactions contemplated hereby.
(o) Capitalization. The authorized capitalization of the
Acquiree consists of 100 shares of $1.00 par value Common Stock of which 100
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.
(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. Except for the Escrow Arrangements, the
Acquiree Shares to be surrendered in the Merger will be owned of record and
beneficially, by Shareholder, 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) Acknowledgment of Dissenters Rights. Shareholder
acknowledges that dissenters rights are available to him under [Chapter [11] of
the MBCA], however, by virtue of his signature to this Merger Agreement does
hereby acknowledge their agreement to forego all such dissenters rights and
accept in lieu thereof the Merger Consideration set forth within this Agreement.
Accordingly, Shareholder 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.
(s) 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 Shareholder 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.
(t) Employee; Benefit Plans.
(i) Schedule 4(t) sets forth the number and names of the employees of
Acquiree, and the total compensation of each of the directors, officers and
employees of Acquiree.
(ii) Schedule 4(t) 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(t),
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.
(iii) Except as disclosed on Schedule 4(t), 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(t), 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) Except as disclosed on Schedule 4(t), 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.
(u) Environmental Matters. Except as set forth in Schedule
4(u) Acquiree is in compliance with all laws, rules and regulations relating to
environmental protection and conservation (including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act and the
Superfund Amendments and Reauthorization Act of 1986, as amended and all
applicable state laws pertaining to the environment), and neither Acquiree or
Shareholder have received any notification of any asserted present or past
failure to so comply with such laws, rules or regulations. Acquiree has obtained
and is in compliance with all permits, licenses and other authorizations
required under federal, state and local laws relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes (collectively "Environmental
Requirements"). Neither Acquiree or Acquiree Shareholders is aware of, nor have
Acquiree or Acquiree Shareholders received notice of, any circumstances which
may interfere with or prevent continued compliance, or which may give rise to
any liability, or otherwise form the basis of any claim, or investigation under
Environmental Requirements, relating to the operation of Acquiree's business.
For the purpose of this Section, "hazardous substances" shall include (1)
hazardous substances as defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and regulations thereunder and, (2)
any substance for which state or local laws require the clean-up, removal or
other special handling of such materials or imposing liability based upon
improper handling thereof.
(v) 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.
(w) Insurance. Schedule 4(w) contains a list of all policies
of liability, environmental, crime, fidelity, life, fire, workers' compensation,
health, director and officer liability and all other forms of insurance
currently 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(w) are outstanding and in full force
and effect and all premiums with respect to such policies are currently paid.
(x) Bank Accounts. Schedule 4(x) contains a list of all bank accounts
maintained by, or for the benefit of, Acquiree.
(y) Customers. Set forth on Schedule 4(y) 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 December 31, 1995. No such
customer has terminated or is presently threatening to terminate its
relationship with Acquiree.
(z)Prepayment Penalties. There are no prepayment penalties or fines
associated with the outstanding long-term debt or lines of credit of Acquiree.
If any such prepayment penalties or fines occur, Shareholder shall be liable for
the payment of such penalties or fines.
(aa) Approval. The Shareholder and the Board of Directors of the Acquiree
have approved the execution of this Agreement and the Merger contemplated
thereby.
(ab) 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 to Shareholder. 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.
(ac) Non-Competitive Activities. The present activities, as of April 1,
1996, of the businesses in which Borah Simon (the former shareholder of
Acquiree) is actively involved are not competitive with the business of
Acquiree.
5. Representations and Warranties of RCM and Acquiror. RCM and the
Acquiror, as a material inducement to the Acquiree and Shareholder 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 Shareholder, 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) SEC Reports. RCM has heretofore delivered to Acquiree and
Shareholder a copy of its Annual Report on Form 10-K for the fiscal year ended
October 31, 1995 and the quarterly reports available subsequent to the fiscal
year end (the "RCM Reports"). As of its date of filing, the RCM Report did not
contain any untrue statements of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
Furthermore, except as otherwise disclosed in such RCM Reports, RCM has
experienced no material adverse change in its financial condition, properties,
business or prospects since the date thereof. The RCM Reports have been prepared
in 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.
(d) 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 4,835,049 shares were outstanding on the date of
this Agrement. 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 outstanding.
Each Class C Warrant entitles the holder to one share of RCM Common Stock.
(e) Subsidiaries. Except as set forth upon Schedule 5(e), 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.
(f) Due Authorization. Subject only to approval of this
Agreement by the Acquiror's shareholders, if necessary, 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.
(g) Merger Shares. The Merger Shares to be delivered to
Shareholder 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.
(h) Brokerage Fees. No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Acquiror or RCM in connection
with this Agreement.
(i) 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.
(j) Full Disclosure. RCM and Acquiror have, and at the Closing
Date will have, disclosed to the Acquiree and Shareholder in the Schedules to
this Agreement or independently, or made available to the Acquiree and Acquiree
Shareholders, documents, books and records pertaining to, all events, conditions
and facts materially affecting the properties, business and prospects of RCM and
Acquiror that are known to RCM and Acquiror. RCM and Acquiror have 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 RCM or
Acquiror.
6. COVENANTS OF THE PARTIES.
(a) Intentionally omitted.
(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 11, each of the parties hereto shall provide to the other
parties (and the other parties' authorized representatives) full access during
normal business hours to the premises, properties, books, records, assets,
liabilities, operations, contracts, personnel, financial information and other
data and information of or relating to such party (including without limitation
all written proprietary and trade secret information and documents, and other
written information and documents relating to intellectual property rights and
matters), and will cooperate with the other party in conducting its due
diligence investigation of such party.
(c) Confidentiality.
(i) Confidentiality of RCM-Related Information. With respect to information
concerning RCM or Acquiror that is made available to Acquiree or Shareholder
pursuant to the provisions of Section 6(b), Acquiree and Shareholder 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 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
and directed by Acquiree in writing to treat such information confidentially).
If this Agreement is terminated pursuant to the provisions of Section 11,
Acquiree and Shareholder 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; (A) is learned by Acquiree or
Shareholder from a third party entitled to disclose it; (B) become known
publicly other than through Acquiree or Shareholder or any party who received
the same through Acquiree or Shareholder; (C) is required by law or court order
to be disclosed by Acquiree or Shareholder or; (D) is disclosed with the express
prior written consent thereto of RCM. Acquiree or Shareholder 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 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 11, 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: (A) is learned by RCM or
Acquiror from a third party entitled to disclose it; (B) becomes known publicly
other than through RCM or Acquiror or any party who received the same through
either of them; (C) is required by law or court order to be disclosed by RCM or
Acquiror; or (D) 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 Shareholder 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 (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which would cause any of its representations or warranties in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Closing Date and (ii) 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. Each of the Shareholder and RCM shall bear their own expenses
in connection with the transactions contemplated by this Agreement.
(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.
(j) Discharge of Bonuses. Any and all accrued bonuses or other
compensation which may be due and owing to Shareholder shall be discharged and
Acquiree and Acquiror released from such obligations upon the Closing Date.
(k) Loss of "S" Corporation Status. Upon completion of the
transactions as contemplated by this Agreement, Shareholder 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.
(l) Documents at Closing. Each party to this Agreement and
Plan of Merger agrees to execute and deliver on the Closing Date those documents
identified in Section 7.
(m) Interim Operations of Acquiree. Except as expressly
provided in subparagraph (xi) below, 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 the parties shall otherwise consent in writing)
that:
(i) Ordinary Course. It 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. It shall not, except as set forth on
Schedule 4(f), (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.
(iii) Issuance of Securities. It 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, to the extent they may be exercised.
(iv) Governing Documents. It shall not amend its Certificate of
Incorporation or its Bylaws.
(v) No Acquisition. It 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. It 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. It 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. It shall not adopt or amend in any material
respect any collective bargaining agreement or employee benefit plan.
(ix) Executive Compensation. It 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. Except as set forth on Schedule 4(f), it shall not enter
into any agreement or arrangement to do any of the foregoing. It 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 the respective party set forth in
this Agreement becoming untrue.
(xi) Permitted Distributions. Notwithstanding anything to the contrary in
this Agreement, on or before the Closing Date, the Acquiree may make
distributions to Shareholder sufficient to pay any federal tax obligation for
which he is individually responsible in connection with the net income of the
Acquiree from January 1, 1996 until the termination of Acquiree's status as an
S-Corporation under the federal tax laws.
(n) Tax Treatment of Acquiree. Prior to Closing, Acquiree shall take any
and all actions necessary to revoke its election to be treated as an
S-Corporation pursuant to the Code.
(o) Prohibition on Trading in RCM Stock. The Acquiree and
Shareholder 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, Shareholder
agrees that he 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 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.
7. THE CLOSING.
7.1 Closing Date. The closing ("Closing") of the Merger shall
take place (a) at the offices of Buchanan Ingersoll, P.C., Two Logan Square,
18th and Arch Streets, 12th Floor, Philadelphia, PA 19103, 10:00 a.m, local time
on May 1, 1996, or (b) at such other time and place and on such other date as
RCM, the Acquiror and Acquiree or Shareholder shall agree. The date of the
Closing is referred to herein as the "Closing Date." The Escrow Agent will be
notified and provided the right to attend the Closing so as to release and/or
deliver the Acquiree Shares on behalf of the Shareholder, and in the event the
Escrow Agent attends the Closing, RCM shall pay for the expenses of the Escrow
Agent in connection with his attendance at the Closing.
7.2 Transactions at Closing. On the Closing Date, the following
transactions shall occur, all of such transactions being deemed to occur
simultaneously:
(a) the Acquiree and Shareholder 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 Shareholder to the effect
that all representations and warranties made by the Acquiree and Shareholder
under this Agreement are true and correct as of the Closing Date, as though
originally given to Acquiror and RCM on said date;
(iv) a certificate and such related schedules and financial statements
prepared and executed by the Chief Financial Officer of Acquiree and executed by
Shareholder evidencing compliance with the financial covenants set forth at
Section 9(q) herein.
(v) a certificate of good standing for the Acquiree from the Secretary of
the State of Maryland, 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) the Registration Rights Agreement described in Exhibit "D" signed by
Shareholder;
(x) the Escrow Agreement described in Exhibit "B" signed by Shareholder and
the Escrow Agent;
(xi) an Employment Agreement described in Exhibit "F" signed by Shareholder and
Acquiror;
(xii) an Investor Representation Certificate described in Exhibit "C" signed by
Shareholder;
(xiii) a Standstill and Shareholder Agreement described in Exhibit "E" signed by
Shareholder and RCM;
(xiv) any documentation associated with the transactions contemplated by
Section 6(n) of this Agreement;
(xv) such documents as may be needed to accomplish the Merger under the
corporate laws of the state of incorporation of the Acquiror and Acquiree in
accordance with the provisions of paragraph 2.1(c);
(xvi) 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;
(b) RCM will deliver or cause to be delivered to the Acquiree and
Shareholder: (i) a certificate or certificates of RCM Common Stock which
represent the Merger Shares.
The certificate or certificates of RCM Common Stock which represent the
Delivered Shares shall bear the following legend.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM
REGISTRATION, UNDER THE SECURITIES ACT OF 1933, BASED ON AN
OPINION LETTER OF COUNSEL FOR THE CORPORATION OR A NON-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
(ii) cash or separate cashier's check (which may be delivered at the
Closing to the Escrow Agent on behalf of the Shareholder) in an amount equal to
$621,500;
(iii)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
Shareholder on said date;
(iv) 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 state and
Commonwealth;
(v) certified resolutions of the Secretary of the Acquiror and RCM dated at
or about the Closing Date authorizing the transactions contemplated under this
Agreement;
(vi) the Registration Rights Agreement described in Exhibit "D" signed by
Shareholder;
(vii) the Escrow Agreement described in Exhibit "B" signed by Shareholder
and the Escrow Agent;
(viii) an Employment Agreement described in Exhibit "F" signed by
Shareholder and Acquiror;
(ix) a Standstill and Shareholders Agreement described in Exhibit "E"
signed by Shareholder and RCM;
(x) such documents as may be needed to accomplish the Merger under the
corporate laws of the state of incorporation of the Acquiror and Acquiree in
accordance with the provisions of paragraph 2.1(c);
(xi) 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 "The Consortium, Inc."
(d) Shareholder shall deliver the Escrow Shares into escrow pursuant to the
terms of the Escrow Agreement.
7.3 Transactions following Closing.
(a) Within thirty (30) days of the Closing Date, RCM and
Shareholder shall cause to be prepared to their mutual satisfaction the Closing
Financial Statements which shall establish the "Tangible Net Worth" of Acquiree
as of the Closing Date in the manner provided for at subparagraph 2.2 hereof and
which shall form the basis for the distribution of additional Merger
Consideration to the Shareholder in the manner provided for at subparagraph 2.2
hereof.
8. Conditions Precedent to Obligations of Acquiree and Shareholder. All
obligations of the Acquiree and Shareholder 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 Shareholder:
(a) The Board of Directors of RCM and the Board of Directors
of Acquiror and RCM, as the 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 Shareholder pursuant to the provisions
hereof at the Closing Date shall be true in all respects at and as of the time
of the Closing Date as though such representations and warranties were made at
and as of such time.
(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 Shareholder
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.
(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 shall have obtained the approval of its principal lender of this
Agreement and the Merger contemplated thereby.
(h) Acquiror shall have executed an Employment Agreement with
Shareholder substantially in form and substance similar to that attached hereto
and made a part hereof as Exhibit "F".
(i) RCM and Shareholder shall have executed a Standstill and
Shareholders Agreement substantially in form and substance similar to that
attached hereto and made a part hereof as Exhibit "E".
(j) RCM and Shareholder shall have executed a Registration
Rights Agreement substantially in form and substance similar to that attached
hereto and made a part hereof as Exhibit "D".
(k) RCM and Shareholder shall have executed an Escrow
Agreement substantially in form and substance similar to that attached hereto
and made a part hereof as Exhibit "B".
(l) Shareholder shall have completed prior to the Closing
Date, to his satisfaction, a due diligence review of the financial condition,
results of operations, properties, assets, liabilities, business or prospects of
RCM.
9. Conditions Precedent to Obligations of RCM and Acquiror. All
obligations of RCM and Acquiror 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 Shareholder
shall have approved the execution of this Agreement and the Merger thereby.
(b) The representations and warranties by the Acquiree and
Shareholder 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 Shareholder 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 to
be complied with by the Closing Date; and there shall be delivered to RCM and
Acquiror a certificate signed by Shareholder to the effect that the
representations and warranties of Shareholder set forth herein are true and
correct in all material respects.
(f) RCM and Acquiror shall have completed prior to the Closing
Date, to their satisfaction, a due diligence review of the financial condition,
results of operations, properties, assets, liabilities, business or prospects of
the Acquiree.
(g) RCM shall have obtained the approval of its principal
lender of this Agreement and the Merger contemplated thereby, and shall have
arranged to pay-off Acquiree's existing line of credit with Citizens Bank of
Maryland.
(h) Acquiree shall not have any "built-in gains" from the termination of
its "S"-Corporation status upon completion of the Merger.
(i) Acquiree and Shareholder 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.
(j) 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
Shareholder.
(k) 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.
(l) Shareholder shall have executed a Registration Rights
Agreement substantially in form and substance similar to that attached hereto
and made a part hereof as Exhibit "D".
(m) Shareholder shall have executed an Escrow Agreement
substantially in form and substance similar to that attached hereto and made a
part hereof as Exhibit "B".
(n) Shareholder shall have executed an Employment Agreement
substantially in form and substance similar to that attached hereto and made a
part hereof as Exhibit "F".
(o) Shareholder shall have executed an Investor Representation
Letter substantially in form and substance similar to that attached hereto and
made a part hereof as Exhibit "C".
(p) Shareholder shall have executed a Standstill and
Shareholders Agreement substantially in form and substance similar to that
attached hereto and made a part hereof as Exhibit "E".
(q) Financial Statements.
(i) The Acquiree shall have provided the Interim Financial Statements to
RCM and Acquiror which reflect: (A) stockholders equity and working capital on
the last day of the period covered by the Interim Financial Statements of no
less than the same amounts in the Financial Statements; and (B) gross revenues,
gross profits and net income through the period reflected therein in amounts
that are in proportion to those reflected in the Financial Statements.
(ii) For the purpose of subparagraphs (q)(i) 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 Financial Statements of Acquiree.
10. Indemnification.
(a) Shareholder. Shareholder 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") 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 Shareholder 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
Shareholder pursuant hereto or in connection with the transactions contemplated
hereby or thereby.
(b) RCM and Acquiror. RCM and Acquiror shall indemnify, defend
and hold harmless Acquiree and Shareholder from and against any and all Claims
incurred by the Acquiree and/or 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 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 should have a
Claim for indemnification hereunder which does not involve a Claim being
asserted against it or sought to be collected by a third party, the Indemnitee
shall promptly send a Claim Notice with respect to such Claim to the Indemnitor.
If the Indemnitor does not notify the Indemnitee within the Notice Period that
it disputes such Claim, the Indemnitor shall pay the amount thereof to the
Indemnitee. If the Indemnitor disputes the amount of such Claim, the controversy
in question shall be submitted to arbitration pursuant to Section 13 hereafter.
11. 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 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, 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) If any party hereto shall default in the observance or in
the due and timely performance of any of the Mutual Covenants contained in
Section 6 of this Agreement, the non-defaulting party may, upon written notice,
terminate this Agreement and in that event, the defaulting party shall
indemnify, hold harmless and assume full and complete responsibility for any and
all expenses of the non-defaulting party incurred in this transaction, without
prejudice to its or their rights and remedies available under law, including the
right to recover expenses, costs and other damages. Notwithstanding the
foregoing, the non-defaulting party may elect to waive such breach by the
defaulting party and proceed with the Closing, thereby waiving any right to
damages as a result of such breach.
12. 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:
<PAGE>
(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.
Buchanan Ingersoll, P.C.
Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 665-3873
Telecopy Number: (215) 659-2066
and
Norman Berson, Esquire
Fineman & Bach, P.C.
1608 Walnut Street
Philadelphia, PA 19103
(b) If to Shareholder:
Peter Kaminsky
3812 Wingleaf Ct.
Rockville, MD 20853
(c) If to the Acquiree, to:
The Consortium of Maryland, Inc.
7315 Wisconsin Avenue
Suite 631N
Bethesda, Maryland 20814
with a courtesy copy to:
Steven Leventhal, Esq.
Air Rights Center
601N, North Tower
7315 Wisconsin Avenue
Bethesda, MD 20814
Telephone Number: (301) 656-5800
Telecopy Number: (301) 656-3400
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.
13. Arbitration.
(a) If a dispute arises as to interpretation of this
Agreement, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by RCM, one by the Shareholder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Philadelphia, Pennsylvania. The decision of a majority of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
14. Miscellaneous.
(a) Release and Discharge. By virtue of his execution of this
Agreement, as of the Closing Date and thereafter, Shareholder does hereby agree
to release, remise and forever discharge Acquiree from and against any and all
debts, obligations, liabilities and amounts owing from the Acquiree to
Shareholder, except for Permitted Dividends and historical employee benefits and
salary owed to Shareholder prior to the Closing Date, and the Acquiree is not
obligated to take any action or make any payments to third parties on behalf of
Shareholder.
(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
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) 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.
(e) 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.
(f) 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.
(g) Assignment. This Agreement may not be assigned by any party hereto
without the prior written consent of the other parties.
(h) Choice of Law. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
(i) 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.
(j) Number and Gender. Words used in this Agreement,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context indicates is appropriate.
(k) 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.
(l) 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.
(m) 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.
(n) Binding Nature. This Agreement will be binding upon and will inure to
the benefit of any successor or successors of the parties hereto.
(o) 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.
(p) 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.
(q) 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.
<PAGE>
IN WITNESS THEREOF, the parties have executed this Agreement as of the
date first above written.
RCM TECHNOLOGIES, INC.
ATTEST
By: By:___________________________
Name:____________________
Title:___________________
SORT ACQUISITION CORP.
ATTEST
By: By:___________________________
Name:____________________
Title:___________________
THE CONSORTIUM OF MARYLAND, INC.
ATTEST
By: By:___________________________
Name:____________________
Title:___________________
Peter Kaminsky
------------
AMENDMENT TO MERGER AGREEMENT
Entered into this 1st day of May, 1996, this Amendment ("Amendment") to
the Merger Agreement among RCM TECHNOLOGIES, INC., SORT ACQUISITION CORP., THE
CONSORTIUM OF MARYLAND, INC. and PETER KAMINSKY, dated as of April 23, 1996
("Merger Agreement") shall amend the Merger Agreement in the following manner:
1. Section 1(b) of the Merger Agreement shall be amended to restate the
definition of "Closing Financial Statements" as "Unaudited Financial Statements
of Acquiree for the interim period from January 1, 1996 through April 30, 1996."
2. Section 2.2(b) of the Merger Agreement shall be amended by adding
the following sentence to the bottom of Section 2.2(b): "Subsequent to delivery
of the Merger Shares into escrow pursuant to Section 2.3, of the amounts paid to
Shareholder under subsection (ii), Shareholder shall pay from such amount to
Acquiree $140,000 to satisfy such outstanding amount which Shareholder owes to
Acquiree as of the Closing Date. In the event there is insufficient immediately
available funds to satisfy such obligation, then Acquiree shall deliver to RCM
for cancellation that amount of Merger Shares which has a valuation equal to
such insufficient amount needed to satisfy such obligation."
3. Section 2.2(c) of the Merger Agreement shall be amended to delete the
following language: "and excluding any receivables owed to the Acquiree by the
Shareholder or any other affiliated party".
4. Section 6(k) of the Merger Agreement shall be amended and restated
in the following manner: "Upon completion of the transactions as contemplated by
this Agreement, Acquiree 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 and that the Shareholder's
obligation is limited to the payment of his personal taxes incurred as a
consequence of the operation of Acquiree prior to the termination of its
S-Corporation status.
5. Section 7.1 of the Merger Agreement shall be amended to delete "May
1, 1996" and add the following in lieu of such deletion "May 2, 1996, however,
for accounting purposes, with effect as of May 1, 1996".
Except as amended hereby, the provisions of the Merger Agreement shall
remain unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
RCM TECHNOLOGIES, INC.
By:___________________________________
Name:
Title:
SORT ACQUISITION CORP.
By:___________________________________
Name:
Title:
THE CONSORTIUM OF MARYLAND, INC.
By:___________________________________
Name:
Title:
--------------------------------------
PETER KAMINSKY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of May 2, 1996 by and
among RCM Technologies, Inc., a Nevada corporation (the "Company") and Peter
Kaminsky (the "Holder"), the sole shareholder of The Consortium Of Maryland,
Inc., a Maryland corporation ("Acquiree").
W I T N E S S E T H:
WHEREAS, the Company and Holder are parties to a Merger Agreement dated
as of April 23, 1996 (the "Merger Agreement") pursuant to which The Consortium
of Maryland, Inc. has elected to effectuate a merger with a newly formed
subsidiary of the Company (the "Merger");
WHEREAS, pursuant to the Acquisition, the Holder is to receive certain
shares of the Company's $.05 par value common stock (the "Common Stock");
WHEREAS, the parties hereto desire to set forth their agreement
concerning the registration under the Securities Act of 1933, as amended of the
Common Stock issued to the Holder in connection with the Acquisition.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Definitions.
(a) "Closing" shall mean that date upon which a closing of the Merger occurs.
(b) "Company" shall mean RCM Technologies, Inc.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(d) "Holders" shall mean Peter Kaminsky, the former shareholder of The
Consortium of Maryland, Inc. who has received shares of the Company's Common
Stock pursuant to the Merger.
(e) "Merger" shall mean the Merger of The Consortium of
Maryland, Inc. Into Sort Acquisition Corp., a newly formed, wholly owned
subsidiary of the Company pursuant to the terms of the Merger Agreement entered
into on April 23, 1996.
(f) "Restricted Stock" shall mean the Common Stock of the
Company that has been issued to the Holders pursuant to the Merger and any
Common Stock issued as a dividend or distribution with respect to, or in
exchange or replacement of, such Common Stock.
(g) "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.
(h) "SEC" shall mean the United States Securities and Exchange Commission.
(i) "Trading Day" shall mean any day on which the New York Stock Exchange is
open for trading.
Capitalized terms used in this Registration Rights Agreement and not
otherwise defined herein shall have the same meaning ascribed thereto in the
Merger Agreement.
2. Shelf Registration.
(a) RCM shall prepare and file, not later than the second
anniversary of the Closing of the Merger, a Registration Statement with the SEC
and use its best efforts to as promptly as possible have such Registration
Statement declared effective for the purpose of facilitating the public resale
of the Restricted Stock subject to the limitations upon resale set forth at
subparagraph 2(c) hereafter, or as otherwise contained herein. The Company shall
not be obligated to obtain a commitment from an underwriter relative to the sale
of such Restricted Stock, whether in a public offering or private placement
transaction; nor shall the Company be restricted in any manner from including
the distribution, issuance or resale of any other securities within such
Registration Statement.
(b) RCM agrees to indemnify and hold harmless the Holder in a
registration, each underwriter (as defined in the Securities Act) if any,
managing the offering of the securities thereunder, each person who controls the
Holder or underwriter within the meaning of Section 15 of the Securities Act
and/or Section 20 of the Exchange Act and each of the officers, directors,
employees and agents of the foregoing in their respective capacities as such, to
the fullest extent permitted by law, from and against any and all actions,
suits, claims, proceedings, costs, losses, damages, judgments, amounts paid in
settlement and expenses (including without limitation reasonable attorneys' fees
and disbursements) to which any of them may become subject under the Securities
Act or otherwise insofar as the same arise out of or are based on (i) any untrue
or alleged untrue statement of any material fact contained in such Registration
Statement on the effective date thereof, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereof,
(ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
or (iii) any violation by RCM of any federal or state law, rule or regulation
applicable to RCM and relating to action required of or inaction by RCM in
connection with any such registration.
3. Registration Procedures. The Company shall:
(a) prepare and file with the Commission a Registration
Statement with respect to the Restricted Stock by no later than the second
anniversary of the Closing of the Merger and use its best efforts to cause such
Registration Statement to become effective as promptly as possible and to remain
effective until all of the Restricted Stock has been sold pursuant thereto;
(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 to 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
Holder's intended method of disposition set forth in such Registration Statement
for such period;
(c) furnish to the Holder and to each underwriter, if any,
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 Holder, 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 the Holder 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 therein not misleading in light of the
circumstances under which they were made;
(f) make available for inspection by the Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
Holder 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 the
Holder, 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 until (A)
in an underwritten public offering of all of the Restricted Stock, 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;
(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;
(i) enter into normal and customary underwriting arrangements
or an underwriting agreement and take all other reasonable and customary actions
if the Holders sell their shares of Restricted Stock pursuant to an underwriting
(however, in no event shall the Company, in connection with such underwriting,
be required to undertake any special audit of a fiscal period in which an audit
is normally not required);
(j) notify the Holder if there are any amendments to the
Registration Statement, any requests by the SEC to supplement or amend the
Registration Statement, or of any threat by the SEC or state securities
commission to undertake a stop order with respect to sales under the
Registration Statement; and
(k) cooperate in the timely removal of any restrictive legends
from the shares of Restricted Stock in connection with the resale of such shares
covered by an effective Registration Statement.
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 paragraphs (2) and (3) 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,
"blue sky" fees, 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 and all accountable or
non-accountable expenses paid to any underwriter in respect of the sale of
Restricted Stock.
(b) Except as otherwise provided herein, the Company will pay
all Registration Expenses in connection with the Registration Statement filed
pursuant to paragraphs (2) and (3) of this Agreement. All Selling Expenses in
connection with any Registration Statement filed pursuant to paragraphs (2) and
(3) of this Agreement shall be borne by the participating Holders in proportion
to the number of shares sold by each, or by such persons other than the Company
(except to the extent the Company may be a seller) as they may agree.
5. Obligations of Holder.
(a) In connection with each registration hereunder, the
selling Holder will furnish to the Company in writing such information with
respect to himself and the securities held by him, and the proposed distribution
by him 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 the Holder's Restricted Stock in the Registration
Statement. The 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 therein not misleading in
light of the circumstances in which they were made.
(b) In connection with each registration pursuant to paragraph
(2) of this Agreement, the Holder included therein will not effect sales thereof
until notified by the Company of the effectiveness of the Registration
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.
6. Information Blackout.
(a) At any time when a registration statement effected
pursuant to Paragraph 2 relating to Restricted Stock is effective, upon written
notice from the Company to the Holder that the Company has determined in good
faith that sale of Restricted Stock pursuant to the registration statement would
require disclosure of non-public material information, the Holder shall suspend
sales of Restricted Stock pursuant to such registration statement until the
earlier of:
(i) thirty (30) days after the Company makes such good faith
determination, and
(ii) such time as the Company notifies the Holder that such material
information has been disclosed to the public or has ceased to be material or
that sales pursuant to such registration statement may otherwise be resumed.
7. 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 Holder.
(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
Telephone Number: (609) 486-1777
Telecopy Number: (609) 488-8833
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, P.C.
Two Logan Square
18th and Arch Streets, 12th Floor
Philadelphia, PA 19103
Telephone Number: (215) 665-3873
Telecopy Number: (215) 569-2066
(ii) if to the Holder, to:
Peter Kaminsky
3812 Wingleaf Ct.
Rockville, MD 20853
with a copy to:
Steven Leventhal, Esq.
Air Rights Center
601N, North Tower
7315 Wisconsin Avenue
Bethesda, MD 20814
Telephone Number: (301) 656-5800
Telecopy Number: (301) 656-3400
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 the Holder and his 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.
(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.
<PAGE>
ATTEST: RCM TECHNOLOGIES, INC.
By:____________________ By: _______________________
Name:
Title:
----------------------------
Peter Kaminsky
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") dated as of May 2, 1996 among RCM
TECHNOLOGIES, INC., a Nevada corporation ("RCM"), Peter Kaminsky,
("Shareholder") and Norman Berson as escrow agent (the "Escrow Agent").
WHEREAS, RCM, Sort Acquisition Corp. ("Acquiror"), The Consortium of
Maryland, Inc. ("Acquiree") and Shareholder have previously entered into a
Merger Agreement dated as of April 23, 1996 (the "Merger Agreement"), providing
for the merger of Avquiree with and into Acquiror on the Closing Date (the
"Merger"); and
WHEREAS, the Merger Agreement provides in Section 2.3 for the
establishment of an escrow fund whereby 25% of the aggregate Merger Shares
received by Shareholder (the "Escrow Shares") shall upon the closing of the
Merger and upon receipt, if at all, by Shareholder thereafter, pursuant to the
Merger Agreement, be placed in escrow to secure the obligation of the
Shareholder for possible indemnification claims presented by RCM against
Shareholder under Section 10 of the Merger Agreement, in each case in the manner
and to the extent set forth herein and in the Merger Agreement.
NOW, THEREFORE, in consideration of RCM, Acquiror, Acquiree and
Shareholder entering into the Merger Agreement and of the mutual premises and
agreements herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions, Other Agreements.
(a) All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Merger
Agreement. In addition, the term "Escrow Fund" and references to the Escrow
Shares when used at any time shall mean all shares of common stock of RCM owned
by Shareholder held in escrow hereunder by the Escrow Agent.
(b) It is expressly understood and agreed by the parties hereto that
all references in this Agreement to the Merger Agreement and to any exhibits to
such Merger Agreement are for the convenience of the parties hereto other than
the Escrow Agent, and the Escrow Agent shall have no obligations or duties with
respect thereto other than the obligation to refer to the Merger Agreement for
the purpose of determining the definitions of certain capitalized terms used
herein and not otherwise defined herein or to interpret any provisions of such
other agreements referred to in this Agreement for purposes of implementation
thereof.
2. Appointment of Escrow Agent.
Norman Berson hereby accepts his appointment as Escrow Agent to serve in
accordance with the terms, conditions and provisions of this Agreement. The
acceptance by the Escrow Agent of its duties under this Agreement is subject to
the terms and conditions set forth at Section 7 hereafter, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent.
3. Establishment of Escrow Fund.
(a) Pursuant to Section 2.3 of the Merger Agreement Shareholder shall
(i) on the Closing Date, deposit with the Escrow Agent the stock certificates
evidencing 25% of the Merger Shares delivered at Closing, and (ii) upon receipt
thereafter, deposit with the Escrow Agent an additional 25% of the Merger Shares
received by Shareholder subsequent to the Closing Date pursuant to the Merger
Agreement (in the aggregate, the "Escrow Shares), all of which shall be
registered on the share transfer books of RCM in the name of the Shareholder who
owns such Escrow Shares comprising the Escrow Fund. If dividends are paid, or a
distribution is made, by RCM with respect to the Escrow Shares, in cash or in
property, such dividends or distributions shall also be held as a part of the
Escrow Fund. In the event of any stock splits, recapitalizations or other
adjustments to the capital stock of RCM, the resulting number of shares or other
securities which the Escrow Shares convert shall be deemed the Escrow Fund.
(b) By virtue of the Shareholder's execution of this Escrow Agreement,
the Shareholder has, without any further act, consented to: (i) the
establishment of this escrow pursuant to the Merger Agreement in the manner set
forth herein, and (ii) all of the other terms, conditions and limitations in
this Agreement.
4. Operation and Administration of the Escrow Fund.
(a) To the extent provided herein and in the Merger Agreement, the
Escrow Fund shall be established and thereafter applied to the payment of
indemnification claims asserted by RCM during the twenty-four (24) month period
following Closing ("Claims") for the benefit of RCM as provided in Section 10 of
the Merger Agreement.
(b) RCM shall make application to the Escrow Agent, with a copy to the
Shareholder (the "Application"), if it has incurred or suffered damages or
losses for damages or losses to which it is entitled to indemnification under
Section 10 of the Merger Agreement. The Application shall identify the amount of
the damages or losses (the "Claim Amount") and state that the Shareholder has
elected to apply the Claim Amount against the Escrow Shares.
(c) Unless the Escrow Agent is otherwise informed in writing by the
Shareholder within 20 days from the date of the Application, disputing the Claim
Amount or the application thereof against the Escrow Shares, then the Escrow
Agent shall release to RCM for cancellation that number of Escrow Shares as are
equal in "value" to the Claim Amount. For this purpose, the "value" of the
Escrow Shares shall be determined by the average closing price of the shares of
Common Stock of RCM as traded on The NASDAQ Stock Market or other principal
exchange upon which its shares are regularly traded for the twenty (20) trading
days immediately preceding the date of the Claim Notice. Upon determination, the
Escrow Agent shall release the appropriate amount of Escrow Shares to RCM for
cancellation.
(d) If the Escrow Agent is notified that the Shareholder in good faith
contests the Claim Amount or the application of the Claim Amount against the
Escrow Shares, then, and in that event, the Escrow Agent shall be permitted to
submit the issues in dispute to arbitration in accordance with the provisions of
Section 13 of the Merger Agreement. Once these issues have been resolved in
accordance with the arbitration procedure set forth within the Merger Agreement
and if the resolution of the dispute is such that the Shareholder owes money to
RCM, then Shareholder shall have 10 days to satisfy such liability, and if such
liability is not timely satisfied, then in such event, the Escrow Agent shall
release to RCM for cancellation that number of Escrow Shares as are equal in
"value" to the amount of the Shareholder's liability determined in arbitration;
whereupon such Claim Amount shall be deemed satisfied in full by virtue of the
application of such Escrow Shares. For this purpose, the term "value" of the
Escrow Shares shall be determined in accordance with subparagraph (c) above.
5. Release of Escrow Shares; Termination.
(a) On the date that is twenty-four (24) months following the Closing
Date (the "Release Date"), the Escrow Agent shall continue to retain in escrow
subject to the terms of this Agreement any Escrow Shares that may, upon RCM's
reasonable estimate, be necessary to satisfy any pending, outstanding or
contested RCM Claims timely submitted pursuant to Section 10 of the Merger
Agreement executed on even date herewith. The balance of the Escrow Shares shall
be released to the Shareholder. The Escrow Shares retained pursuant to this
subparagraph shall remain subject to escrow until resolution of the matters
identified herein.
(b) Once all of the Escrow Shares have been either released to RCM for
cancellation or returned to the Shareholder, the provisions of this Escrow
Agreement shall no longer be of any force and effect and this Escrow Agreement
shall be deemed to have terminated.
6. Fees and Expenses of Escrow Agent.
The Escrow Agent shall be entitled to reimbursement of all reasonable
out-of-pocket expenses incurred by the Escrow Agent in connection with the
performance of his functions hereunder, including reasonable fees and
disbursements of counsel. The responsibility for payment of reimbursements to
the Escrow Agent shall be assumed by RCM.
7. Duties and Liabilities of the Escrow Agent.
(a) The Escrow Agent shall act hereunder as depositary only, and it
shall not be responsible or liable in any manner whatever for any determinations
regarding the cancellation and forfeiture of the Escrow Shares to be made
pursuant to Section 4 hereof. It is agreed that the duties and obligations of
the Escrow Agent are those herein specifically provided and no other. Except as
otherwise specifically provided in this Agreement, the Escrow Agent shall not
have any liability under, nor duty to inquire into, the terms and provisions of
any agreement or instrument, other than this Agreement. The duties of the Escrow
Agent are ministerial in nature, and the Escrow Agent shall not incur any
liability whatsoever other than for its own willful misconduct or gross
negligence.
(b) The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or written instructions
given by the parties hereto. The Escrow Agent shall not have any responsibility
for the genuineness or validity of any document or other material presented to
or deposited with it nor shall it have any liability for any action taken,
suffered or omitted in accordance with any written instructions or certificates
given to it hereunder and believed by it in good faith to be what it purports to
be and to be signed by the proper party or parties, nor for retaining the Escrow
Fund in the absence of instructions to the contrary.
(c) The Escrow Agent shall not be liable for any error of judgment, or
for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from doing in
connection with this Agreement, except its own gross negligence or willful
misconduct.
(d) The Escrow Agent may consult with, and obtain the advice of, legal
counsel selected by it in the event of any question as to any of the provisions
hereof or its duties hereunder, and the Escrow Agent shall incur no liability
and shall be fully protected for any action taken, suffered or omitted by it in
good faith in accordance with the advice of such counsel, provided that the
Escrow Agent shall have used reasonable care in the selection of such counsel.
(e) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall have received instructions, claims or
demands from any party hereto which, in its reasonable opinion, conflict with
any of the provisions of this Agreement or with instructions, claims or demands
of any other party hereto, the Escrow Agent shall refrain from taking any action
and its sole obligation shall be to keep safely all property held in escrow
hereunder until it shall be directed otherwise in writing by all of the
surviving parties hereto or by a final order or judgment of an arbitration panel
or court of competent jurisdiction, or an award of an arbitrator pursuant to an
arbitration conducted pursuant to Section 13 of the Merger Agreement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to initiate or defend any
legal proceedings which may be instituted against it in respect of the subject
matter of this Agreement, provided that the Escrow Agent shall at all times take
such action as is reasonably necessary to keep safely all property held in
escrow hereunder. If the Escrow Agent does elect to so act or is required to so
act in order to keep safely all property held in escrow hereunder, the Escrow
Agent will do so only to the extent that it is indemnified to its reasonable
satisfaction against the cost and expense of such defense or initiation.
8. Amendment.
This Agreement may be amended, modified or rescinded by and upon
written notice to the Escrow Agent given by RCM, on the one hand, and the
Shareholder, on the other hand; provided that the rights, duties, liabilities,
indemnities and immunities of the Escrow Agent hereunder may not be adversely
affected at any time without the written consent of the Escrow Agent; and
provided further that the interest of the Shareholder may not be adversely
affected without the written consent of the Shareholder. The failure of the
Shareholder to object to a modification of this Agreement, shall not act as a
waiver of the right of the Shareholder to object to that modification at a later
date.
9. Voting of Escrow Shares.
All rights to vote the Escrow Shares while they are part of the Escrow
Fund shall be retained by the Shareholder. The Shareholder shall not have any
right to transfer or assign their interest in the Escrow Shares in the Escrow
Fund during such period of time as such Shares remain a part of the Escrow Fund
unless RCM shall first have consented thereto in writing and provided that any
such transferee shall deliver to the Escrow Agent a duly signed stock power
covering such RCM Shares and the Escrow Agent shall hold such transferee's
shares and stock powers in escrow subject to this Agreement.
10. Notices.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by certified mail, postage prepaid and
return receipt requested, or by hand delivery or by telecopy (promptly confirmed
by delivery of an original copy of such notice or communication):
(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
Telephone Number: (609) 486-1777
Telecopy Number: (609) 488-8833
<PAGE>
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, P.C.
Two Logan Square
18th and Arch Streets, 12th Floor
Philadelphia, PA 19103
Telephone Number: (215) 665-3873
Telecopy Number: (215) 569-2066
(ii) If to the Shareholder:
Peter Kaminsky
3812 Wingleaf Ct.
Rockville,MD 20853
with a copy to:
Steven Leventhal, Esq.
Air Rights Center
601N, North Tower
7315 Wisconsin Avenue
Bethesda, MD 20814
Telephone Number: (301) 656-5800
Telecopy Number: (301) 656-3400
11. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of
the successors and permitted assigns of each of the parties hereto.
12. 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.
13. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the law of the Commonwealth of Pennsylvania applicable to
contracts executed and to be performed entirely within said Commonwealth.
14. Severability.
In case any provision in this Agreement shall be held invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions hereof will not in any way be affected or impaired thereby, unless
the provisions held invalid shall substantially impair the benefits of the
remaining portions of this Agreement.
15. Consent to Limited Jurisdiction.
The Escrow Agent hereby agrees that any legal action or proceeding with
respect to disputes arising out of this Agreement not otherwise subject to
arbitration under Section 13 of the Merger Agreement may be brought in the
courts of the Commonwealth of Pennsylvania or of the United States of America
for the Eastern District of Pennsylvania, and, by execution and delivery of this
Agreement, the Escrow Agent irrevocably accepts for itself and in respect of the
property held by it as Escrow Agent hereunder the jurisdiction of the aforesaid
courts, it being understood and agreed that such consent to jurisdiction is for
the sole and limited purpose of resolving disputes under this Agreement and
shall in no way be deemed to be a general and unconditional consent to the
jurisdiction of the aforesaid courts.
16. Resignation and Removal of Escrow Agent.
(a) The Escrow Agent may at any time resign as Escrow Agent hereunder
by giving written notice of its resignation to each of the parties hereto, at
their respective addresses set forth in Section 11 of this Agreement, at least
thirty (30) days prior to the date specified for such resignation to take
effect. The Escrow Agent may be removed at any time by an instrument or
concurrent instruments in writing delivered to the Escrow Agent and signed by
each of the parties hereto (other than the Escrow Agent).
(b) If at any time the Escrow Agent shall resign or shall be removed in
accordance with the provisions of clause (a) above, RCM and the Shareholder
shall use their respective best efforts to jointly appoint a successor escrow
agent under this Agreement. In the event of the resignation or removal of the
Escrow Agent, if no appointment of a successor escrow agent shall have been made
pursuant to the preceding sentence within the thirty (30) day period referred to
in the first sentence of paragraph (a) above, then the retiring Escrow Agent may
apply to any court of competent jurisdiction to appoint a successor escrow
agent. Such court may thereupon, after such notice, if any, as such court may
deem proper and prescribe, appoint a successor escrow agent hereunder.
17. Indemnification. Except for the expenses in Section 6 of this Agreement, RCM
and the Shareholder, jointly and severally agree to indemnify, defend and hold
the Escrow Agent harmless from and against any and all loss, damage, liability
and expense that may be incurred by the Escrow Agent arising out of or in
connection with its duties, obligations or performance as Escrow Agent
hereunder, except as caused by its negligence or willful misconduct, including
without limitation the reasonable legal costs and expenses of defending itself
against any claim or liability in connection with its performance hereunder. The
terms of this Section 17 shall survive the termination of this Agreement and,
with respect to claims arising in connection with the Escrow Agent's duties
while acting as such, the resignation or removal of the Escrow Agent. The Escrow
Agent agrees to notify RCM and the Shareholder in writing of the written
assertion of a claim against the Escrow Agent or of any suit or proceeding
commenced against the Escrow Agent promptly after the Escrow Agent has received
any such written assertion of a claim or has been served with the summons or
other legal process, in each case giving information as to the nature and basis
of the claim, but in no event will the failure to give such notice affect the
obligation of RCM to indemnify the Escrow Agent pursuant to this Section 17
unless the rights of RCM and Shareholder shall have been materially impaired by
such failure. Each of RCM and the Shareholder will be entitled to participate at
its own expense in the defense of any suit or proceeding brought to enforce any
such claim and, if it so elects in writing, may assume the entire defense and
control of any such suit or proceeding. Neither RCM nor the Shareholder shall be
liable for any counsel fees or other expenses incurred by the Escrow Agent after
the date that RCM or the Shareholder shall have so elected to assume the defense
and control of any such suit or proceeding. In addition, neither RCM nor the
Shareholder shall be liable for any settlement of any such suit, proceeding or
claim without the prior written consent of RCM and the Shareholder.
Notwithstanding the foregoing, the Shareholder shall only be liable for an
amount under this Section 17 up to, but no greater than Three Thousand Dollars
($3,000), however, where the Shareholder is determined to be at fault for the
amount incurred by the Escrow Agent, then RCM and the Shareholder shall be
jointly and severally liable for such amount incurred by the Escrow Agent, with
no such limitation on the amount which Shareholder may be liable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed as of the date first written above.
ATTEST: RCM TECHNOLOGIES, INC.
By:____________________________ By:
- --------------------------
Name:
Title:
- --------------------------
Peter Kaminsky
Escrow Agent:
___________________________ 1608 Walnut Street
Norman Berson 19th Floor
Philadelphia, PA 19103
Telephone: (215) 893-9300
Facsimile: (215) 893-8719
STANDSTILL AND SHAREHOLDERS' AGREEMENT
This Agreement dated as of May 2, 1996, between Peter Kaminsky (the
"Holder") and RCM Technologies, Inc., a Nevada corporation (the "Company").
R E C I T A L S:
WHEREAS, the Company and Holder are parties to a Merger Agreement dated
as of April 23, 1996 (the "Merger Agreement") pursuant to which The Consortium
of Maryland, Inc. ("Acquiree") has elected to effectuate a merger with Sort
Acquisition Corp. ("Acquiror"), a newly formed, wholly-owned subsidiary of the
Company (the "Merger");
WHEREAS, the Holder represents the former holder of 100% of the outstanding
capital stock of Acquiree;
WHEREAS, as a result of a closing under the Merger Agreement, Holder
acquired a certain number of shares of the Common Stock of the Company (the "RCM
Shares");
WHEREAS, the parties desire to set forth certain agreements concerning
the RCM Shares and other matters.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Definitions
(a) "Acquiree" shall mean The Consortium of Maryland, Inc., a Maryland
corporation.
(b) "Company" shall mean RCM Technologies, Inc., a Nevada
corporation.
(c) "Holder" shall mean Peter Kaminsky, the former shareholder of
The Consortium of Maryland, Inc. who received RCM Shares pursuant to the Merger
Agreement.
(d) "Merger Agreement" shall mean that agreement entered into
as of April 23, 1996, among the Company, Acquiror, the Holder and Acquiree.
(e) "Voting Securities" shall mean all classes of capital
stock of the Company which are then entitled to vote generally in the election
of directors of the Company.
Unless otherwise indicated herein, any capitalized terms utilized in
this Agreement shall have the meaning ascribed thereto in the Merger Agreement.
2. Covenants of the Holder
(a) During the term identified in subparagraph (b) below:
(i) The Holder shall not acquire, announce an intention to acquire, offer
or propose to acquire, or agree to acquire, directly or indirectly, by purchase
or otherwise, Beneficial Ownership of any Voting Securities, or direct or
indirect rights to options to acquire (through purchase, exchange, conversion or
otherwise) any Voting Securities, without the prior written consent of the
Company.
(ii) The Holder shall vote all Voting Securities owned by him in connection
with all matters to be voted on by the holders of Voting Securities, in
accordance with the recommendation of the majority of the Board of Directors.
The Holder, as a holder of Voting Securities, shall be present, in person or by
proxy, at all meetings of shareholders of the Company so that all Voting
Securities beneficially owned by him may be counted for the purpose of
determining the presence of a quorum at such meetings.
(iii) The Holder shall not deposit any Voting Securities in a voting trust
or subject any Voting Securities to any arrangement or agreement with respect to
the voting of such Voting Securities, except in connection with a transfer
permitted under 2(a)(v)(D).
(iv) The Holder shall not solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act) in opposition to the recommendation of the majority of the Board of
Directors of the Company with respect to any matter.
(v) The Holder shall not join a partnership, limited partnership, limited
liability company, limited liability partnership, syndicate or other group or
otherwise act in concert with any person, for the purpose of acquiring, holding,
voting or disposing of Voting Securities, or otherwise become a "person" within
the meaning of Section 13(d)(3) of the Exchange Act.
(vi) The Holder shall not, directly or indirectly, offer or sell or
transfer any Voting Securities.
(b) The covenants identified in Section 2(a)(i)-(vi) shall
continue in full force and effect until the earlier of (i) the second
anniversary of the Closing of the Merger or (ii) the date of termination of
Holder pursuant to the terms of his employment agreement.
3. Miscellaneous
(a) The Holder, on one hand, and the Company, on the other
acknowledge and agree that irreparable damage would occur in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any Court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which they maybe entitled at
law or in equity.
(b) If requested in writing by the Company, the Holder shall
present or cause to present promptly all certificates representing Voting
Securities for the placement thereon of the following legend, which will remain
thereon as long as such Voting Securities are subject to the restrictions
contained in this Agreement, and which will be in addition to any legend that
denotes the securities as "restricted securities" under the Securities Act of
1933, as amended;
"The securities represented by this certificate are subject to
the provisions of an agreement dated as of April 23, 1996
between RCM Technologies, Inc. and the person identified in
such agreement and may not be sold or transferred except in
accordance therewith. A copy of said agreement is on file at
the offices of the corporate secretary of RCM Technologies,
Inc."
The Company may enter a stop transfer order with the transfer
agent or agents of Voting Securities against the transfer of Voting Securities
except in compliance with the requirements of this Agreement. The Company agrees
to remove promptly any stop transfer order with respect to, and issue promptly
an legend and certificates in substitution for, certificates of any Voting
Securities that are no longer subject to the restrictions contained in this
Agreement.
(c) As used herein, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 under the Exchange Act and the term "person"
shall mean any individual, partnership, corporation, trust, limited liability
company, or other entity.
(d) This Agreement contains the entire understanding of the
parties with respect to the transaction contemplated hereby and the Agreement
maybe terminated only by an agreement in writing executed by the parties hereto.
(e) Descriptive headings are for the convenience only and shall not control
or affect the meaning or construction or any provision of this Agreement.
(f) For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto, and each
such executed counterpart shall be, and shall be deemed to be, an original
instrument.
(g) All notices, consents, and requests, instructions,
approvals and other communications provided for herein and all legal processing
in regard hereto shall be valid if given, made or served, if in writing and
delivered personally, by facsimile, or sent by registered mail, postage prepaid
(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 courtesy copy to;
Stephen M. Cohen, Esq.
Buchanan Ingersoll, P.C.
Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 665-3873
Telecopy Number: (215) 569-2066
<PAGE>
(ii) If to the Holder:
Peter Kaminsky
3812 Wingleaf Ct.
Rockville, MD 20853
with a courtesy copy to;
Steven Leventhal, Esq.
Air Rights Center
601N, North Tower
7315 Wisconsin Avenue
Bethesda, MD 20814
Telephone Number: (301) 656-5800
Telecopy Number: (301) 656-3400
Any such notices shall be effective (i) when delivered in person or sent by
telecopy, (ii) one business day after being sent by overnight delivery or (iii)
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.
(h) From and after the Termination Date or earlier termination
of this Agreement, the covenants of the parties set forth herein shall be of no
further force and effect and the parties shall be under no further obligation
with respect thereto.
(i) This Agreement shall be governed by construed and forced
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed therein.
<PAGE>
IN WITNESS WHEREOF, the Holder and the Company have caused this
Agreement to be duly executed, in the case of accompanied by its respective
officers, each of who is duly authorized, all as of the day and year first above
written.
RCM TECHNOLOGIES, INC.
ATTEST
By: By:______________________
Name:
Title:
THE HOLDER:
- --------------------------
Peter Kaminsky
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 2nd day of May, 1996, by and between SORT
ACQUISITION CORP., a Pennsylvania corporation, to be known as THE CONSORTIUM OF
MARYLAND, INC., a Pennsylvania corporation (hereinafter "Employer") and PETER
KAMINSKY (hereafter "Employee").
In consideration of the mutual promises herein contained and intending
to be legally bound hereby, the parties agree as follows:
1. EMPLOYMENT:
Employer hereby employees Employee and Employee accepts
employment upon the terms and conditions of this Agreement.
2. TERM:
The term of the employment pursuant to this Agreement
("Employment Term") shall be for two (2) years commencing May 2,
1996, and terminating May 2, 1998.
3. DUTIES:
Employee shall devote his full time, attention and best
efforts to his duties as Senior Vice-President of Employer.
Employee shall at all times discharge his duties in consultation
with and under the supervision of the Chief Executive Officer of
RCM Technologiesa, Inc., the parent corporation of Employer
("RCM"). Employee shall not engage in any business or perform
any services in any capacity whatsoever other than for Employer except with the
prior written approval of Employer.
4. COMPENSATION:
For all services to be rendered by Employee hereunder,
Employer shall pay to Employee a salary of $200,000 per annum, to be paid in
accordance with the general payroll practices of the Employer as from time to
time in effect. Employee shall also be entitled, subject to the terms and
conditions of particular plans and programs, to all fringe benefits afforded to
other executives of Employer and of RCM, including, but not by way of
limitation, the right to participate in any pension, stock option, retirement,
major medical, group health, disability, accident and life insurance, car
allowances, bonuses and other employee benefit programs made generally
available, from time to time, by the Employer and by RCM.
5. VACATIONS, HOLIDAYS, ILLNESS, DISABILITY:
(a) Employee shall receive four (4) weeks of paid vacation in
each calendar year, to be taken at times which do not unreasonably interfere
with the performance of the Employee's duties hereunder. Vacation pay shall be
non-cumulative and to the extent not taken shall not be compensated.
(b) Employee shall be entitled to those holidays allowed for by the policy
of Employer and RCM.
(c) If Employee is prevented from performing his duties by
reason of illness or incapacity for an aggregate of sixty (60) days in any year
of this Agreement, Employer shall not be obligated to pay Employee compensation
for any period of absence in excess of the aggregate of sixty (60) days in any
year. Sick pay shall be non-cumulative and, to the extent not used, shall not be
compensated.
(d) If Employee is prevented from performing his duties by
reason of verifiable physical or mental illness or incapacity for a continuous
period of sixty (60) days, then Employer, in addition to the remedy provided for
in subparagraph (c) hereof, may on fifteen (15) days prior notice, terminate
Employee's employment. Employer shall include Employee in such disability
insurance coverage as Employer provides for executive level employees of
Employer.
6. TERMINATION:
(a) Notwithstanding any other provision hereof, this Agreement
shall terminate immediately upon the death of Employee or Employee's discharge
by Employer upon good and sufficient cause. In the event of Employee's death
while an Employee in good standing with Employer, said Employer will pay
Employee's named beneficiary, or if there be none then living, to his estate,
Employee's base salary at the date of his death for a period of one (1) month
after the date of death, payable weekly.
(b) "Good and sufficient cause" shall mean:
(i) a material breach of this
Agreement which has not been cured wihtin 15 days of written notice thereof; or
(ii) action or behavior reasonably expected to have a material adverse
effect on the reputation of Employer, including acts of moral turpitude or
dishonesty.
7. EXPENSES:
During the term of this Agreement, Employer agrees to pay all
reasonable expenses incurred by Employee in furtherance of the business of
Employer including travel and entertainment expense. Employer agrees to
reimburse Employee for any such expenses upon submission by him of a statement
itemizing such expenses.
8. MEDICAL INSURANCE:
During the term of this Agreement, Employer shall include
Employee and his family in the medical insurance coverage provided for executive
level employees of Employer.
9. NON-DISCLOSURE/NON-COMPETITION:
(a) For the purpose of this Section 9, the term "Employer"
shall mean the Employer, and, if any, all of its subsidiaries and affiliates,
and its parent corporation, RCM Technologies, Inc., and any of its subsidiaries
or affiliates. Employee will not, directly or indirectly, during the Employment
Term and for a period of one (1) year following the termination thereof for
whatsoever reason, without authorization of Employer, disclose to, or make use
of for himself or for any person, corporation, or other entity, any trade secret
or other confidential information concerning the business, clients, methods,
operations, financing or services of Employer or its affiliates. Trade secrets
and confidential information shall mean information disclosed to employee or
known by him as a consequence of his employment by Employer, whether or not
pursuant to this Agreement, and not generally known in the industry, and not
such information learned by Employee prior to the date of this Agreement.
Without limiting the generality of the foregoing trade secrets and confidential
information shall include market analysis and market expansion plans of Employer
and all technical information relating to products or systems developed or being
developed by Employer and all planned product or system improvements or changes.
(b) Employee agrees that he will not, directly or indirectly,
during the Employment Term and for a period of one (1) year following the
termination thereof for whatsoever reason, voluntary or involuntary, within the
United States directly or indirectly, whether an employee, owner, partner,
agent, director, officer of shareholder engage in the business of placement of
technical or temporary personnel and, without limiting the generality of the
foregoing do any of the following:
(i) Solicit, divert, accept business from or otherwise take
away any client of Employer who is or was a client during the term of
employment, including all clients directly or indirectly produced or generated
by Employee.
(ii) Solicit, induce or contract with any of the Employer's
employees to leave Employer or to work for Employee or any company with which
Employee is connected.
(iii) Solicit, divert or take away any of Employer's sources of business.
The provisions of this paragraph 9 shall be construed as an agreement
independent of any other provision of this Agreement and the existence of any
claim or cause of action of Employee against Employer whether arising out of
this Agreement or otherwise shall not constitute a defense to the enforcement by
Employer of the provisions of this paragraph.
10. REMEDIES:
Employee agrees that a violation of any of the provisions of
paragraph 9 hereof will cause irreparable damage to Employer the exact amount of
which it will be impossible to ascertain and, for that reason, Employee agrees
that Employer shall be entitled to injunctive relief restraining any violation
of paragraph 9 hereby by Employee and any person, firm or corporation associated
with him, such right to be cumulative and in addition to all other remedies
available to Employer by reason of such violation.
11. ARBITRATION:
Except for matters arising under paragraphs 9 and 10 hereof,
any controversy, claim or dispute arising out of or relating to this Agreement,
shall be submitted to arbitration in the City of Philadelphia, Commonwealth of
Pennsylvania, in accordance with the rules of the American Arbitration
Association; the expenses of the arbitration shall be paid equally by Employer
and Employee. Any judgment upon the award made and rendered by the arbitration
may be entered in a Court of competent jurisdiction.
12. CHOICE OF LAW:
This Agreement shall be governed by the law of the
Commonwealth of Pennsylvania without regard to conflict and of law principals.
13. NOTICES:
Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by certified mail,
return receipt requested, as follows:
IF TO EMPLOYEE: Peter Kaminsky
3812 Wingleaf Ct.
Rockville, MD 20853
IF TO EMPLOYER: The Consortium Of Maryland, Inc.
c/o RCM Technologies, Inc.
2500 McClellan Ave., Suite 350
Pennsauken, NJ 08109-4613
14. BINDING EFFECT:
The terms of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective personal representatives,
successors and assigns.
15. INTEGRATION-AMENDMENT:
This Agreement contains the entire agreement between the
parties hereto, with respect to the transactions contemplated herein and
supersedes all previous representation, negotiations, commitments and writings
with respect thereto. No amendment or alteration of the terms of this Agreement
shall be valid unless made in writing and signed by all parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THE CONSORTIUM OF MARYLAND, INC.
BY: ____________________
ATTEST:_____________________
----------------------
PETER KAMINSKY
