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MERGER AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
CI ACQUISITION CORP.
AND
CATARACT, INC.
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TABLE OF CONTENTS
Page
1. RECITALS AND DEFINITIONS............................................ 1
2. MERGER AND MERGER CONSIDERATION..................................... 3
2.1 The Merger..................................................... ... 3
2.2 Merger Consideration............................................... 5
3. DELIVERY OF ACQUIREE SHARES......................................... 5
4. REPRESENTATIONS AND WARRANTIES OF ACQUIREE
AND ACQUIREE SHAREHOLDERS.............................................. 6
5. REPRESENTATIONS AND WARRANTIES OF RCM AND ACQUIR0R................. 16
6. COVENANTS OF THE PARTIES TO THIS AGREEMENT......................... 18
7. CLOSING DATE..................................................... . 26
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE
AND ACQUIREE SHAREHOLDERS............................................. 26
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM
AND ACQUIROR. ........................................................ 27
10. CONDITIONS SUBSEQUENT............................................. 30
11. INDEMNIFICATION................................................... 34
12. DOCUMENTS AT CLOSING.............................................. 37
13. TERMINATION.........................................................39
14. NOTICES.............................................................40
15. MISCELLANEOUS.......................................................42
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LIST OF SCHEDULES
4(b) Financial Statements
4(d) Accounts Receivable of Acquiree as of July 31, 1995
4(e) Material adverse changes
4(f) Litigation
4(h) Articles of Incorporation, Bylaws and Contracts of Acquiree
4(i) Tax information
4(j) All material Contracts and Agreements
4(k) Liens, encumbrances and general description of all real property in
which Acquiree has an ownership interest
4(l) Licenses, trademarks and trade names
4(m) Consents
4(u) Number of employees, names and addresses and total compensation of all
directors and officers of Acquiree - identifies all employee benefit
plans
4(v) Compliance with environmental and conservative laws
4(y) List of all insurance policies
4(z) List of all bank accounts maintained or for the benefit of Acquiree
4(aa) List of 10 largest customers of Acquiree, based on dollar volume of
income as of October 2, 1994
4(ab) Prepayment penalties
5(a) Articles of Incorporation and Bylaws of Acquiror
5(b) Articles of Incorporation and Bylaws of RCM
5(d) Subsidiaries of Acquiror
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LIST OF EXHIBITS
Exhibit "A" Articles of Merger
Exhibit "B" Registration Rights Agreement
Exhibit "C" Voting Trust Agreement
Exhibit "D" Investor Representation Letter
Exhibit "E" Stock Pledge Agreement
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MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and entered into as of
this 31st day of July 1995, by and among RCM Technologies, Inc., a
Nevada corporation ("RCM"); CI Acquisition Corp., a Pennsylvania corporation
(the "Acquiror"); Cataract, Inc., a Pennsylvania corporation (the "Acquiree");
and those shareholders of Acquiree identified at paragraph 1 below (the
"Acquiree Shareholders").
RECITALS:
A. The Acquiree Shareholders together own 100% of the issued and
outstanding shares of common stock of the Acquiree (the "Acquiree Shares").
The Acquiree Shares constitute all of the issued and outstanding capital stock
of the Acquiree.
B. RCM owns 100% of the issued and outstanding shares of common stock
of the Acquiror.
C. The Directors of RCM, Acquiror and the Acquiree believe that the
merger of the Acquiree with and into the Acquiror would be advantageous and
beneficial to the respective shareholders, employees, and customers of those
companies.
D. It is the intention of the parties hereto that: (i) the Acquiree
shall be merged with and into the Acquiror in exchange for certain cash
consideration and the issuance to the Acquiree Shareholders of shares of RCM's
authorized but unissued common stock to the extent and in the manner set forth
below (the "Merger"); and (ii) the issuance of stock in connection with the
Merger shall qualify as a transaction exempt from registration or
qualification under the Securities Act of 1933, as amended, and under the
applicable securities laws of the states or jurisdictions where the Acquiree
Shareholders reside.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Recitals and Definitions.
(a) The foregoing RECITALS are true and correct, and are
incorporated herein and made a part hereof.
(b) For purposes of this Agreement, the terms set forth below
shall have the following meanings:
Acquiree - Cataract, Inc., a Pennsylvania corporation
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Acquiree Shareholders - Joseph A. Marubbio, Paula Marubbio, Robert L.
Starer, Merle A. Starer, James R. Affleck, Jr., Sarah B. Affleck and those
other [entities][individuals] that may become a shareholder, and a party to
this Agreement, as a result of the exercise of the Prudential Options
Acquiror - CI Acquisition Corp., a Pennsylvania corporation
Agreement - shall mean this Merger Agreement.
Code - the Internal Revenue Code of 1986, as amended
Closing - the transaction of events set forth in Section
12 hereof
Closing Date - the day on which the Closing is to be held as
set forth in Section 7 hereof
Exchange Act - the Securities Exchange Act of 1934, as amended
Financial Statements - audited financial statements of Cataract, Inc., a
Delaware corporation, for the fiscal year ended September 30, 1992 and the
eight-month period ended May 31, 1993 and audited financial statements of
the Acquiree for the four months ended September 30, 1993 and combined with
the eight months ended May 31, 1993, a financial statement for the twelve
months ended September 30, 1993 and fiscal year ended September 30, 1994
and the interim (unaudited) financial statements for July 2, 1995, all in
such form as is acceptable to RCM to comply with its filing obligations to
the SEC
Merger - the merger of the Acquiree with and into the
Acquiror
Merger Consideration - the Merger Shares and cash consideration to be
received by the Acquiree Shareholders pursuant to the Merger
Merger Shares - shares of RCM Common Stock to be issued to the
Acquiree Shareholders pursuant to the terms of this Merger Agreement
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Permitted Dividends - "Subchapter S" dividends representing earnings
of the Acquiree on which the Acquiree Shareholders have been or will be
subject to individual taxation, but which have not otherwise been withdrawn
from or paid by the Acquiree.
Prudential Options - those stock purchase options issued as of May 5,
1993 by the Acquiree (under its previous name, "Ente, Inc.") to Prudential
Leveraged Asset Trust - 1990A and to Saint Peters College Leveraged Asset
Trust - 1989A, providing for the issuance of an amount of stock equal to no
more than 15% of the common stock of the Acquiree in the aggregate
RCM - RCM Technologies, Inc., a Nevada corporation RCM Common Stock -
common stock, $.05 par value per share, of RCM
RCM Statements - RCM's consolidated financial statements (audited) for
the fiscal years ended October 31, 1994, 1993 and 1992, and (unaudited) for
the six months ended April 30, 1995
SEC - the Securities and Exchange Commission Securities Act - the
Securities Act of 1933, as amended 2. Merger and Merger Consideration.
2.1 The Merger
(a) Upon the terms and conditions of this Agreement, on the Closing
Date (as defined herein), Acquiree shall be merged with and into Acquiror
in accordance with the provisions of the Pennsylvania Business Corporation
Law of 1988 (the "PBCL") and the separate corporate existence of Acquiree
shall cease, and the Acquiror shall continue as the surviving corporation
under the laws of the Commonwealth of Pennsylvania with the corporate name,
"CATARACT, INC.".
(b) The Merger shall become effective upon the filing of the articles
of merger, substantially in the form of Exhibit A, attached hereto and made
a part hereof (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Pennsylvania in accordance with Section 1928 of the PBCL.
The Articles of Merger shall be filed by the appropriate parties
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thereto on the Closing Date. The date and time when the Merger shall
become effective is referred to herein, in accordance with Section 7
hereof, as the "Closing Date."
(c) On the Closing Date:
(i) Acquiror shall continue its existence under the laws of the
Commonwealth of Pennsylvania as the surviving corporation;
(ii) the separate corporate existence of Acquiree shall cease;
(iii) all rights, title and interests to all real estate and other
property owned by Acquiree shall be allocated to and vested in Acquiror as
the surviving corporation without reversion or impairment, without further
act or deed, and without any transfer or assignment having occurred, but
subject to any existing liens or other encumbrances thereon, and all
liabilities and obligations of Acquiree shall be allocated to Acquiror as
the surviving corporation which shall be the primary obligor therefor and,
except as otherwise provided by law or contract, no other party to the
Merger, other than Acquiror as the surviving corporation, shall be liable
therefor;
(iv) the Articles of Incorporation of Acquiror as in effect
immediately prior to the consummation of the Merger, other than the name of
Acquiror which shall be changed to "CATARACT, INC." in connection with the
Merger, shall be the Articles of Incorporation of the surviving
corporation, until thereafter amended as provided by law and such Articles
of Incorporation;
(v) Each of Acquiree, the Acquiree Shareholders, Acquiror and RCM
shall execute and deliver, and file or caused to be filed with the
Secretary of State of the Commonwealth of Pennsylvania the Articles of
Merger, with such amendments thereto as the parties hereto shall deem
mutually acceptable.
(vi) the Bylaws of Acquiror, as in effect immediately prior to the
consummation of the Merger, shall be the Bylaws of the Acquiror as the
surviving corporation until thereafter amended as provided by law and such
Bylaws; and
(vii) the officers and directors of the Acquiror as the surviving
corporation shall continue to hold office until their respective successors
shall have been elected or appointed in accordance with the Bylaws of the
Acquiror as the surviving corporation or until they shall have sooner been
removed or shall have resigned in accordance with such Bylaws.
2.2 Merger Consideration
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(a) On the Closing Date, upon tendering to the Acquiror a certificate
or certificates representing the Acquiree Shares, and after having taken or
caused to be taken all other actions otherwise required in this Agreement
to effectuate a closing hereunder, the Acquiree Shareholders thereof shall
be entitled to receive immediately therefor, and RCM shall cause to be
issued or paid, as the case may be: (i) certificates in the name of each of
the Acquiree Shareholders representing, in the aggregate, the number of
Merger Shares which as of the Closing Date have an aggregate valuation
equal to One Million Two Hundred Thousand Dollars, ($1,200,000), (for this
purpose, the "valuation" of the Merger Shares shall be determined based
upon the average of the closing bid prices of the RCM Common Stock for the
thirty (30) calendar day period immediately preceding the Closing Date);
and (ii) the sum of Two Million Dollars ($2,000,000) in immediately
available funds. The consideration received pursuant to this subparagraph
(a) of this Section 2.2 shall be collectively referred to as the "Merger
Consideration." (b) The Merger Consideration received by the Acquiree
Shareholders shall be divided among them in the same proportion as they own
the Acquiree Shares. No other consideration shall be payable to the
Acquiree Shareholders in connection with the Merger.
3. Delivery of Acquiree Shares. On the Closing Date, the Acquiree
Shareholders will deliver to the Acquiror for cancellation the certificates
representing all of the Acquiree Shares, duly endorsed (or with duly
executed stock powers) so as to transfer all of the Acquiree Shares to the
Acquiror, free and clear of all liens, claims and encumbrances. The Merger
shall not be effected unless certificates representing all of the Acquiree
Shares are delivered to the Acquiror on the Closing Date, free and clear of
all liens, claims and encumbrances.
4. Representations and Warranties of Acquiree and Acquiree
Shareholders. As a material inducement to RCM and the Acquiror to enter
into this Agreement and consummate the transactions contemplated hereby,
the Acquiree Shareholders do hereby jointly and severally, and the Acquiree
does hereby make the following representations and warranties to RCM and
Acquiror. The representations and warranties are true and correct in all
material respects at this date, and will be true and correct in all
material respects on the Closing Date as though made on and as of such
date.
(a) Shareholders of Acquiree. The Acquiree Shareholders are, and will
be on the Closing Date, the sole owners, of record and beneficially, of all
the issued and outstanding shares of the Acquiree's capital stock.
Acquiree does not now own, or at the Closing Date will own, more than
5% percent of the issued and outstanding capital stock of any other
corporation or an equity interest in any other entity.
(b) Financial Statements. The Financial Statements have been attached
as Schedule [4(b)]. The Financial Statements shall be in a form
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prepared in all material respects in compliance with the requirements
of Regulation S-X promulgated by the SEC under the Exchange Act.
(i) The Financial Statements and financial information contained
therein will present fairly the financial condition of the Acquiree for the
periods covered (subject, in the case of unaudited statements, to normal
year-end audit adjustments which will not be material to the Acquiree,
taken as a whole, in amount or effect). The Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied. The books and records of the Acquiree, financial and
other, are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(c) Undisclosed Liabilities. The Acquiree does not have any material
liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, that are not reflected or otherwise provided for in the
Financial Statements to the extent such liabilities or obligations are
otherwise required to be reflected by generally accepted accounting
principles, except for liabilities and obligations arising subsequent to
the date of the Financial Statements in the ordinary course of business,
none of which individually or in the aggregate will be materially adverse
to the business or financial condition of the Acquiree. There are no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 of the Financial Accounting Standards Board) of
the Acquiree that will not be adequately provided for.
(d) Accounts Receivable. Attached hereto as Schedule 4(d) is a list of
all accounts receivable of Acquiree as of July 2, 1995 and aging schedule
pertaining thereto. All of the accounts receivable of Acquiree as of
July 2, 1995 and on the Closing Date, are bona fide accounts receivable of
Acquiree representing the sales price of (or other sums or fees receivable
for or in respect of) goods, merchandise, or services sold or performed by
Acquiree in valid transactions in the regular course of its business to or
for the benefit of its customers. Such accounts receivable are not
uncollectible or subject to offset or counterclaim or otherwise in
controversy.
(e) Materially Adverse Change. Except as set forth in Schedule [4(e)],
or as otherwise specifically stated in this Agreement, since the date of
their financial statements as of, and for the period ended, October 2,
1994, or later stub-period financial statements, if provided, the business
of the Acquiree has been operated in the ordinary course and there has not
been:
(i) Any materially adverse change in the business, condition
(financial or otherwise), results of operations, prospects, properties,
assets, liabilities, earnings or net worth of the Acquiree for such period
(other than as a result of Permitted Dividends) or at any time during such
period;
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(ii) Any material damage, destruction or loss (whether or not covered
by insurance) affecting the Acquiree or its assets, properties or business;
(iii) Any declaration, setting aside or payment of any dividend or
other distribution in respect of any shares of the capital stock of the
Acquiree, or any direct or indirect redemption, purchase or other
acquisition of any such stock or any agreement to do so, except for
Permitted Dividends;
(iv) Any issuance or sale by the Acquiree, or agreement by the
Acquiree, or any of the Acquiree Shareholders, to sell or pledge any of the
Acquiree's securities, nor have any irrevocable proxies been given with
respect to the Acquiree's securities, except in connection with pledges
securing obligations to be repaid from the cash portion of the Merger
Consideration concurrently with the Closing of the Merger;
(v) Any cancellation, breaches or cost over-runs on any existing
contract of which Acquiree is a party;
(vi) Any statute, rule, regulation or order adopted by any
governmental body, agency or authority (including orders of regulatory
authorities with jurisdiction over the Acquiree) that materially and
adversely affects the Acquiree or its business or financial condition;
(vii) Any material increase in the rate or terms of compensation
(including bonus compensation) payable or to become payable by Acquiree to
its directors, officers or key employees; provided, however, that this
subsection shall not restrict or limit the Acquiree in any way from hiring
additional personnel who are required for its operations; or
(viii) Any other events or conditions of any character that may
reasonably be expected to have a materially adverse effect on the Acquiree
or its business or financial condition.
(f) Litigation. Except as set forth in Schedule 4(e), there are no
actions, suits, claims, investigations or legal, administrative or
arbitration proceedings pending or, to the knowledge of the Acquiree or any
of the Acquiree Shareholders, threatened against the Acquiree, whether at
law or in equity, or before or by any federal, state, municipal, local,
foreign or other governmental department, commission, board, bureau, agency
or instrumentality, nor does the Acquiree or the Acquiree Shareholders know
of any basis for any such action, suit, claim, investigation or proceeding.
(g) Compliance: Governmental Authorizations. The Acquiree has complied
in all material respects with all federal, state, local or foreign laws,
ordinances, regulations and orders applicable to its business, including
without limitation, federal and state securities, banking collection and
consumer protection laws and regulations that, if not complied with, would
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materially and adversely affect its businesses. The Acquiree has all
federal, state, local and foreign governmental licenses and permits
necessary for the conduct of its business. Such licenses and permits are in
full force and effect, except as to any licenses and permits, the absence
of which would not have a materially adverse effect upon the financial
condition of the Acquiree. Neither the Acquiree nor the Acquiree
Shareholders knows of any violations of any such licenses or permits. No
proceedings are pending or threatened to revoke or limit the use of such
licenses or permits.
(h) Due Organization. The Acquiree is a corporation duly organized,
validly existing and subsisting under the laws of the Commonwealth of
Pennsylvania; its status is active; it is qualified to do business and in
good standing in each state where its properties are owned, leased or
operated, or the business conducted, by them require such qualification and
where failure to so qualify would have a material adverse effect on its
financial condition, properties, business or results of operations. The
Acquiree has the power to own its properties and assets and to carry on its
business as now presently conducted. True and complete copies of the
Articles of Incorporation and Bylaws of Acquiree have been attached as
Schedule [4(h)].
(i) Taxes. Except as disclosed on Schedule [4(i)] all (i) federal,
state, local or foreign tax returns (collectively, the "Returns") required
to be filed with respect to the properties, assets, operations, income and
net worth of Acquiree have been timely filed or appropriate extensions have
been obtained and such Returns are true, correct and complete in all
material respects; (ii) taxes and governmental charges, including, without
limitation, any interest and penalties (collectively, "Taxes") due pursuant
to such Returns have been paid or adequate provision therefore has been
made on the Financial Statement; and (iii) federal, state, local and
foreign withholdings required with respect to the business of Acquiree have
been withheld and timely paid over to the appropriate governmental
authority. Schedule [4(i)] sets forth for each subsequent taxable year the
current status of any examination being conducted by the Internal Revenue
Service or any other taxing authority relating to Acquiree. Notwithstanding
the foregoing, no representation or warranty is made with respect to
Acquiree's entitlement to any claimed tax refund or the amount of any
claimed tax refund which Acquiree may ultimately receive. Except as
disclosed on Schedule [4(i)], there are no outstanding agreements or
waivers extending the statutory period of limitation concerning any tax
liability of Acquiree, no examination of any Return of Acquiree is
currently in progress and no governmental authority has, within the last
three (3) years, notified Acquiree or Acquiree Shareholders of any tax
claim, investigation or proceeding, except as scheduled.
(j) Agreements. Schedule [4(j)] contains a true and complete list and
brief description of all material written or oral contracts, agreements,
mortgages, obligations, understandings, arrangements, restrictions and
other instruments to which the Acquiree is a party or by which the Acquiree
or its assets may be bound. True and correct copies of all items set forth
on Schedule [4(j)] have been or will have been made available to the
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Acquiror prior to the date hereof. No event has occurred that (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default by the Acquiree under any
of the contracts or agreements set forth in Schedule [4(j)]. Neither the
Acquiree nor any of the Acquiree Shareholders have knowledge of any
material default by the other parties to such contracts or agreements. In
addition, no material violations have occurred pursuant to any loan
agreements to which the Acquiree is a party.
(k) Title to Property and Related Matters. The Acquiree has, and at
the time of the Closing Date will have, good and marketable title to all of
its properties, interests in properties and assets, real, personal and
mixed, owned by it at the date of this Agreement or acquired by it after
the date of this Agreement, of any kind or character, free and clear of any
liens or encumbrances, except (i) those set forth in Schedule [4(k)], and
(ii) liens for current taxes and other liens arising by operation of law to
secure obligations that are not yet delinquent. Schedule [4(k)] also
contains a general description of all real property in which Acquiree has
an ownership interest. Except as set forth in said Schedule [4(k)] and
except for matters that may arise in the ordinary course of business, the
assets of the Acquiree are in good operating condition and repair,
reasonable wear and tear excepted. There does not exist any condition that
materially interferes with the use thereof in the ordinary course of the
business of the Acquiree.
(l) Licenses; Trademarks: Trade Names. Except as set forth on Schedule
[4(l)], the Acquiree does not have nor does it own any licenses,
trademarks, trade names, service marks, copyrights, patents or any
applications for any of the foregoing that relate to its business.
(m) Due Authorization. This Agreement has been duly authorized,
executed and delivered by the Acquiree and constitutes a valid and binding
agreement of the Acquiree, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws relating to, limiting or affecting the
enforcement of creditors rights generally or by the application of
equitable principles. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, nor
compliance with any of the provisions hereof, will violate in any material
respect any order, writ, injunction or decree of any court or governmental
authority, or violate or conflict with in any material respect or
constitute a default under (or give rise to any right of termination,
cancellation or acceleration under), any provisions of the Acquiree's
Articles of Incorporation or Bylaws, the terms or conditions or provisions
of any note, bond, lease, mortgage, obligation, agreement, understanding,
arrangement or restriction of any kind to which the Acquiree is a party or
by which the Acquiree or its properties may be bound, or violate in any
material respect any statute, law, rule or regulation applicable to the
Acquiree, except that the consents disclosed on Schedule [4(m)] will be
required as to the Merger pursuant to the terms of those scheduled
agreements. No consent or approval
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by any governmental authority is required in connection with the
execution and delivery by the Acquiree of this Agreement or the
consummation of the transactions contemplated hereby.
(n) Capitalization. The authorized capitalization of the Acquiree
consists of 1,000,000 shares of no-par value Common Stock of which 500,000
shares are issued and outstanding as of the date of this Agreement. All
outstanding securities have been duly authorized, validly issued, and are
fully paid and non-assessable, and all such securities were issued in
compliance with applicable federal and state securities laws and
regulations. There are no outstanding or presently authorized securities,
warrants, preemptive rights, subscription rights, options or related
commitments or agreements of any nature to issue any of the Acquiree's
securities, except for the Prudential Options which, if exercised, will
change the amount of issued shares of the stock of Acquiree and upon which
exercise the Acquiree will cause the holder(s) of the exercised Prudential
Options to become additional Acquiree Shareholders hereunder.
(o) Full Disclosure. The Acquiree has, and at the Closing Date will
have, disclosed to the Acquiror in the Schedules to this Agreement or
independently, or made available to the Acquiror, documents, books and
records pertaining to, all events, conditions and facts materially
affecting the properties, business and prospects of the Acquiree that are
known to the Acquiree and the Acquiree Shareholders. The Acquiree has not
and will not have, at the Closing Date, withheld disclosure or availability
of any events, conditions and facts of which it may have knowledge and that
may materially and adversely affect the properties, business or prospects
of the Acquiree.
(p) Brokerage Fees. The Acquiree has not incurred, and will not incur,
any liability for brokerage or finder's fees or similar charges in
connection with the transactions contained within this Agreement.
(q) Share Ownership. The Acquiree Shares to be surrendered in the
Merger will be owned of record and beneficially, by the Acquiree
Shareholders, free and clear of all liens and encumbrances of any kind and
nature, and have not been sold, pledged, assigned or otherwise transferred.
There are no agreements (other than this Agreement) to sell, pledge, assign
or otherwise transfer such securities.
(r) Acquiree Shareholders' Obligation. This Agreement constitutes the
valid and legally binding obligation of the Acquiree Shareholders. Neither
the execution of this Agreement, nor the consummation of the transactions
contemplated hereby, will constitute in any material respect a violation of
or default under, or conflict in any material respect with, any judgment,
decree, statute or regulation of any governmental authority applicable to
the Acquiree Shareholders or any contract, commitment, agreement or
restriction of any kind to which any of the Acquiree Shareholders are a
party or by which any of the Acquiree Shareholders are bound. The execution
and delivery of this Agreement does not, and the consummation of the
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transactions described herein will not, violate in any material
respect applicable law, or any mortgage, lien, agreement, indenture, lease
or understanding (whether oral or written) of any kind outstanding relative
to the Acquiree Shareholders, except for pledges that will be satisfied
concurrently with the Closing of the Merger.
(s) Acknowledgment of Dissenters Rights. Acquiree Shareholders
acknowledge that dissenters rights are available to them under Subchapter D
of Chapter 15 of the Pennsylvania Business Corporation Law, however, by
virtue of their signature to this Merger Agreement do hereby acknowledge
their agreement to forego all such dissenters rights and accept in lieu
thereof the Merger Consideration set forth within this Agreement.
Accordingly, such Acquiree Shareholders will not have an opportunity to
dissent from the actions taken by the Board of Directors of Acquiree or
from the transactions contemplated by this Agreement.
(t) Approvals Required. No approval, authorization, consent, order or
other action of, or filing with, any person, firm or corporation or any
court, administrative agency or other governmental authority is required in
connection with the execution and delivery by the Acquiree Shareholders of
this Agreement or the consummation of the transactions described herein,
except to the extent that any of the Acquiree Shareholders may be required
to file reports in accordance with relevant regulations under federal and
state securities laws upon execution of this Agreement and/or consummation
of the transactions contemplated hereby and the satisfaction of existing
secured creditors of the Acquiree.
(u) Employee; Benefit Plans.
(i) Schedule [4(u)] sets forth the number of employees, a list of the
names, addresses and total compensation of all directors and officers of
Acquiree and each employee of Acquiree.
(ii) Schedule [4(u)] identifies all "employee benefit plans" (as such
term is defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and programs, including, without
limitation, any pension plans, health and welfare plans, life, disability,
medical, dental or hospitalization insurance plans, sick-leave, vacation
accrual or holiday plans, bonus, savings, profit-sharing or other similar
benefit plans, deferred compensation, stock option, stock ownership and
stock purchase plans covering employees or former employees of Acquiree.
Except as disclosed on Schedule [4(u)], each such plan or program has been
operated substantially in accordance with its terms and, to the extent
applicable, ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"). Acquiree does not sponsor or contribute to, nor have they ever
sponsored or been required to contribute to, any "multiemployer plan" as
such term is defined in Section 3(37) of ERISA.
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(iii) Except as disclosed on Schedule [4(u)], Acquiree does not have
any written contracts, or oral contracts, including any employment,
management, agency or consulting contracts, with respect to any of its
current or retired employees.
(iv) Except as disclosed on Schedule [4(u)], Acquiree is not a party
to any collective bargaining agreement and there are no union
organizational activities or efforts to effect a representation election
pending or threatened.
(v) Acquiree has complied in all material respects with all applicable
laws relating to the employment of labor, including the provisions thereof
relating to benefits required to be provided under Part VI of Subtitle B of
Title I of ERISA or Section 4980B(f) of the Code (collectively, "COBRA"),
wages, hours, working additions, employee benefit plans and the payment of
withholding and social security taxes.
(v) Environmental Matters. Except as set forth in Schedule [4(v)]
Acquiree is in compliance with all laws, rules and regulations relating to
environmental protection and conservation (including, but not limited to,
the Comprehensive Environmental Response, Compensation and Liability Act
and the Superfund Amendments and Reauthorization Act of 1986, as amended
and all applicable state laws pertaining to the environment), the violation
of which would have a materially adverse effect on the financial condition
of the Acquiree, and neither Acquiree or Acquiree Shareholders have
received any notification of any asserted present or past failure to so
comply with such laws, rules or regulations. Acquiree has obtained and is
in compliance with all permits, licenses and other authorizations required
under federal, state and local laws relating to pollution or protection of
the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants or hazardous or toxic materials or wastes (collectively
"Environmental Requirements"), the violation of which would have a
materially adverse effect on the financial condition of the Acquiree.
Neither Acquiree or Acquiree Shareholders is aware of, nor have Acquiree or
Acquiree Shareholders received notice of, any circumstances which may
interfere with or prevent continued compliance, or which may give rise to
any liability, or otherwise form the basis of any claim, or investigation
under Environmental Requirements, relating to the operation of Acquiree's
business. For the purpose of this Section, "hazardous substances" shall
include (1) hazardous substances as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and
regulations thereunder and, (2) any substance for which state or local laws
require the clean-up, removal or other special handling of such materials
or imposing liability based upon improper handling thereof.
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(w) Not Investment Company. The Acquiree is not an "investment
company" as defined in Section 368(a)(2)(F)(iii) of the Code, nor is it an
investment company under the Investment Company Act of 1940.
(x) Acquiree Documents. All documents relating to the Acquiree and its
business that have been previously delivered to RCM in connection with the
Merger and this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required or necessary to be
stated therein to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(y) Insurance. Schedule [4(y)] contains a list of such policies
relating to liability, environmental, crime, fidelity, life, fire, workers'
compensation, health, director and officer liability and all other forms of
insurance currently owned or held by Acquiree, and identifies for each such
policy, to the extent such information is reasonably available to Acquiree,
the underwriter, policy number, coverage type, premium, expiration date and
deductible. All of the insurance policies listed on Schedule [4(y)] are
outstanding and in full force and effect and all premiums with respect to
such policies are currently paid.
(z) Bank Accounts. Schedule [4(z)] contains a list of all bank
accounts maintained by, or for the benefit of, Acquiree.
(aa) Customers. Set forth on Schedule [4(aa)] is a list of the ten
(10) largest customers of Acquiree based on the dollar volume of income
generated by that customer for the fiscal year ended October 2, 1994 and as
of July 2, 1995. No such customer has terminated or is presently
threatening to terminate its relationship with Acquiree.
(bb) Prepayment Penalties. Except as disclosed on Schedule [4(ab)],
which reflects a prepayment penalty of twenty-five thousand dollars
($25,000), there are no prepayment penalties or fines associated with the
outstanding long-term debt or lines of credit of Acquiree. If any such
prepayment penalties or fines occur, RCM and Acquiror shall be liable for
the payment of such penalties or fines in any amount not to exceed an
amount equal to twenty thousand dollars ($20,000). If such penalty or fine
is greater than twenty thousand dollars, then Acquiree Shareholders shall
be liable for the amount of penalty or fine which exceeds twenty thousand
dollars.
(cc) Blue Sky Filings. Acquiree Shareholders acknowledge and agree to
the following:
(i) Each Acquiree Shareholder who is a pennsylvania resident has the
right to cancel and withdraw from this Merger Agreement upon written notice
to RCM within two business days of the execution of the Merger Agreement.
Any notice of cancellation or withdrawal should be made by telegram or
certified or registered mail and will be effective upon delivery to Western
Union or deposit in the United States mails, postage or other
13
\PHILA2\63461_6
transmittal fees paid. Upon such cancellation or withdrawal, the
Acquiree Shareholder will have no obligation or duty under the Merger
Agreement; and
(ii) No Acquiree Shareholder who is a Pennsylvania resident may sell
or transfer their Merger Shares for twelve months from the Closing Date, as
such sale or transfer would violate Section 203(d) of the Pennsylvania
Securities Act of 1972 and the regulations thereunder.
(dd) Approval. The Board of Directors of the Acquiree and the Acquiree
Shareholders shall have approved the execution of this Agreement and the
Merger thereby.
5. Representations and Warranties of RCM and Acquiror. RCM and the
Acquiror, as a material inducement to the Acquiree and the Acquiree
Shareholders to enter into this Agreement and consummate the transactions
contemplated hereby, do hereby jointly and severally make the following
representations and warranties to the Acquiree and the Acquiree
Shareholders, which representations and warranties are true and correct in
all material respects at this date, and will be true and correct in all
material respects on the Closing Date as though made on and as of such
date.
(a) Due Organization of Acquiror. The Acquiror is a corporation duly
organized, validly existing and subsisting under the laws of the
Commonwealth of Pennsylvania, is qualified to do business and in good
standing in each state where the properties owned, leased or operated, or
the business conducted, by it require such qualification and where failure
to so qualify would have a material adverse effect on the financial
condition, properties, business or results of operations of the Acquiror.
The Acquiror has the corporate power to own its property and to carry on
its business as now presently conducted. The Articles of Incorporation and
By-Laws of the Acquiror are attached hereto as Schedule [5(a)] and are made
a part hereof.
(b) Due Organization of RCM. RCM is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada, is qualified to business and in good standing in each state where
the properties owned, leased or operated, or the business conducted, by it
require such qualification and where failure to so qualify would have a
material adverse effect on the financial condition, properties, business or
results of operations of RCM. RCM has the corporate power to own its
property and to carry on its business as now presently conducted. The
Articles of Incorporation and By-Laws of RCM are attached hereto as
Schedule [5(b)] and are made a part hereof.
(c) Capitalization. The authorized capital stock of RCM consists of
40,000,000 shares of common stock, par value $.05 per-share (the "RCM
Common Stock"), of which 14,713,565 shares were outstanding on the date of
this Agreement; and. All of the outstanding shares of RCM Common Stock have
been validly issued and are fully paid and nonassessable. As of the date of
this Agreement, RCM had 786,709 Class C Warrants currently issued and
14
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outstanding. The Class C Warrants entitle the holders to purchase
786,709 shares of RCM Common Stock.
(d) Subsidiaries. Except as set forth upon Schedule [5(d)], the
Acquiror has no subsidiaries, nor does it own any interest in any other
corporation, partnership or other entity, nor does it have any right or
obligation, whether under any agreement (oral or written) or instrument of
any kind, to acquire any such interest.
(e) Due Authorization. This Agreement has been duly authorized,
executed, and delivered by the Acquiror and RCM, and constitutes a legal,
valid, and binding obligation of the Acquiror and RCM, enforceable in
accordance with its terms except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors rights
generally or by the application of equitable principles. The execution,
delivery and performance of this Agreement by the Acquiror and RCM will not
violate or conflict with in any material respect or constitute a default
under any provisions of applicable law, the Acquiror's or RCM's Articles of
Incorporation or Bylaws, or any agreement or instrument to which the
Acquiror or RCM is a party or by which it or its assets are bound. No
consent of any federal, state, municipal or other governmental authority is
required by Acquiror or RCM for the execution, delivery or performance of
this Agreement by the Acquiror and RCM. No consent of any party to any
contract or agreement to which the Acquiror is a party or by which any of
its property or assets are subject is required for the execution, delivery
or performance of this Agreement by the Acquiror that has not been obtained
at the date of this Agreement.
(f) Merger Shares. The Merger Shares to be delivered to the Acquiree
Shareholders will, when issued, be validly and legally issued, free and
clear of all liens, encumbrances, transfer fees and preemptive rights, and
will be fully paid and non-assessable.
(g) Brokerage Fees. RCM and Acquiror have not incurred, and will not
incur, any liability for brokerage or finder's fees or similar charges in
connection with this Agreement.
(h) No Approvals Required. No approval, authorization, consent, order
or other action of, or filing with, any person, firm or corporation or any
court, administrative agency or other governmental authority is required in
connection with the execution and delivery by RCM of this Agreement or the
consummation of the transactions described herein, except to the extent
that the parties may be required to file reports in accordance with
relevant regulations under federal and state securities laws.
(i) SEC Reports. RCM has heretofore delivered to Acquiree a copy of
its most recent reports filed with the SEC, including its Annual Report on
Form 10-K for the fiscal year ended October 31, 1994 and the
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\PHILA2\63461_6
quarterly report on Form 10-Q for the period ended April 30, 1995
(collectively, the "RCM Reports"). As of their respective dates neither of
the RCM Reports contained any untrue statements of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which
they were made, not misleading. Furthermore, except as otherwise disclosed
in such RCM Reports, RCM has experienced no material adverse change in its
financial condition, properties, business or prospects since the dates
thereof. The RCM Reports have been prepared in material compliance with all
applicable securities laws, rules and regulations, and the financial
statements included therein had been prepared in accordance with general
accepted accounting principles, consistently applied, and represent fairly
the financial condition of RCM as of the date and for the periods covered
thereby.
6. Covenants of the Parties to this Agreement.
(a) Disclosure Documents.
(i) Each of RCM and Acquiror shall supply to Acquiree the necessary
information in writing, or cause the necessary information to be supplied
in writing, relating to RCM and Acquiror for inclusion in any document(s)
to be delivered to Acquiree Shareholders in connection with seeking their
approval of the transactions contemplated by this Agreement.
(ii) Acquiree shall supply to RCM the necessary information in
writing, or cause the necessary information to be supplied in writing,
relating to Acquiree for inclusion in any documents or reports to be filed
with the SEC or any regulatory agency in connection with the transactions
contemplated by this Agreement, with the cost of obtaining any such
information from third parties to be paid upon the Closing Date by Acquiror
or RCM.
(b) Access to Information. At all times prior to the Closing Date or
the earlier termination of this Agreement in accordance with the provisions
of Section [13], each of the parties hereto shall provide to the other
parties (and the other parties' authorized representatives) full access
during normal business hours to the premises, properties, books, records,
assets, liabilities, operations, contracts, personnel, financial
information and other data and information of or relating to such party
(including without limitation all written proprietary and trade secret
information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate
with the other party in conducting its due diligence investigation of such
party.
(c) Confidentiality.
(i) Confidentiality of RCM-Related Information. With respect to
information concerning RCM or Acquiror that is made available to Acquiree
or Acquiree Shareholders pursuant to the provisions of Section
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[6(b)], Acquiree and Acquiree Shareholders agree that they shall hold
such information in strict confidence, shall not use such information
except for the sole purpose of evaluating the Merger and related
transactions and shall not disseminate or disclose any of such information
other than to their directors, officers, employees, shareholders,
affiliates, agents, lenders and representatives who need to know such
information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Acquiree of the
confidential nature of such information, the prohibition under federal
securities laws of trading upon any material non-public information and
directed by Acquiree in writing to treat such information confidentially.
If this Agreement is terminated pursuant to the provisions of Section [13],
Acquiree and Acquiree Shareholders shall immediately return all such
information, all copies thereof and all information prepared by Acquiree
based upon the same, upon RCM's request; provided, however, that one copy
of all such material may be retained by Acquiree's outside legal counsel
for purposes only of resolving any disputes under this Agreement. The above
limitations on use, dissemination and disclosure shall not apply to
information that; (i) is learned by Acquiree or Acquiree Shareholders from
a third party entitled to disclose it; (ii) becomes known publicly other
than through Acquiree or Acquiree Shareholders or any party who received
the same through Acquiree or Acquiree Shareholders; (iii) is required by
law or court order to be disclosed by Acquiree or Acquiree Shareholders or;
(iv) is disclosed with the express prior written consent thereto of RCM.
Acquiree or Acquiree Shareholders shall undertake all necessary steps to
ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this subparagraph (i);
(ii) Confidentiality of Acquiree-Related Information. With respect to
information concerning Acquiree that is made available to RCM or Acquiror
pursuant to the provisions of Section [6(b)], RCM and Acquiror jointly and
severally agree that they shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating
the Merger and the related transactions and shall not disseminate or
disclose any of such information other than to their directors, officers,
employees, shareholders, affiliates, agents, lenders and representatives
who need to know such information for the sole purpose of evaluating the
Merger and the related transactions (each of whom shall be informed in
writing by RCM or Acquiror, as appropriate, of the confidential nature of
such information and directed by such party in writing to treat such
information confidentially). If this Agreement is terminated pursuant to
the provisions of Section [13], RCM and Acquiror jointly and severally
agree to return immediately all such information, all copies thereof and
all information prepared by either of them based upon the same, upon
Acquiree's request; provided, however, that one copy of all such material
may be retained by RCM's outside legal counsel for purposes only of
resolving any disputes under this Agreement. The above limitations on use,
dissemination and disclosure shall not apply to information that: (i) is
learned by RCM or Acquiror from a third party entitled to disclose it; (ii)
becomes known publicly other than through
17
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RCM or Acquiror or any party who received the same through either of
them; (iii) is required by law or court order to be disclosed by RCM or
Acquiror; or (iv) is disclosed with the express prior written consent
thereto of Acquiree. RCM and Acquiror jointly and severally agree to
undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with
the provisions of this subparagraph (ii).
(iii) Nondisclosure. Neither RCM, Acquiror, Acquiree or Acquiree
Shareholders shall disclose to the public or to any third party the
existence of this Agreement or the transactions contemplated hereby or any
other material non-public information concerning or relating to the other
party hereto, other than with the express prior written consent of the
other party hereto, except as may be required by applicable securities laws
as they pertain to public companies, law or court order or to enforce the
rights of such disclosing party under this Agreement, in which event the
contents of any proposed disclosure shall be discussed with the other party
before release; provided, however, that notwithstanding anything to the
contrary contained in this Agreement, any party hereto may disclose this
Agreement to any of its directors, officers, employees, shareholders,
affiliates, agents and representative who need to know such information for
the sole purpose of evaluating the Merger, to any party whose consent is
required in connection with the Merger or this Agreement; or to any
regulatory body where such disclosure is required under federal or state
law.
(d) Consents. RCM, Acquiror and Acquiree shall cooperate and use their
best efforts to obtain, prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts as are necessary for the
consummation of the transactions contemplated by this Agreement.
(e) Filings. RCM, Acquiror and Acquiree shall, as promptly as
practicable, make any required filings, and RCM, Acquiror and Acquiree
shall promptly make any other required submissions, under any law, statute,
order rule or regulation with respect to the Merger and the related
transactions and shall cooperate with each other with respect to the
foregoing.
(f) All Reasonable Efforts. Subject to the terms and conditions of
this Agreement and to the fiduciary duties and obligations of the board of
directors of Acquiree and RCM, each of the parties to this Agreement shall
use all reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any injunctions or other
impediments or delays, legal or otherwise, as soon as reasonable
practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
(g) Notification of Certain Matters. Acquiree shall give prompt notice
to RCM, and RCM and Acquiror shall give prompt notice to Acquiree, of (a)
the occurrence or non-occurrence of any event, the occurrence or non-
occurrence of which would cause any of its representations or warranties in
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\PHILA2\63461_6
this Agreement to be untrue or inaccurate in any material respect at
or prior to the Closing Date and (b) any material failure of Acquiree, on
the one hand, or RCM or Acquiror, on the other hand, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement; provided, however, the
delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available to the party receiving such notice
under this Agreement.
(h) Expenses. Except as otherwise expressly provided herein, all costs
and expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated.
(i) Consent of Auditors. Acquiree Shareholders shall, when necessary,
obtain the necessary consents of all auditors who have provided audit
reports in connection with any of the Financial Statements which may be
required by RCM for the preparation and filing of documents and reports
with the SEC in connection with, or that relate to the Merger, and the cost
of any such consents shall be paid by Acquiror.
(j) Loss of "S" Corporation Status. Upon completion of the Merger as
contemplated by this Agreement, Acquiree Shareholders shall be responsible
for the payment and filing of any final tax returns or other obligations
incurred in connection with the termination of Acquiree's "S" Corporation
status.
(k) Registration Rights. On or prior to the Closing Date, Acquiree
Shareholders shall execute a Registration Rights Agreement substantially in
form and substance similar to that attached hereto and made a part hereof
as Exhibit "B".
(l) Voting Trust. On or prior to the Closing Date, the Acquiree
Shareholders shall execute a Voting Trust Agreement substantially in form
and substance similar to that attached hereto and made a part hereof as
Exhibit "C".
(m) Investor Representation Letter. On or prior to the Closing Date,
the Acquiree Shareholders shall execute an Investor Representation Letter
substantially in form and substance similar to that attached hereto and
made a part hereof as Exhibit "D".
(n) Pledge Agreement. On or prior to the Closing Date, Acquiree
Shareholders shall execute a Pledge Agreement substantially in form and
substance similar to that attached hereto and made a part hereof as Exhibit
"E".
(o) Schedules. The Acquiree shall have delivered all of the Schedules
required herein, and copies of the documents referred to therein, including
Exhibit "A", to RCM and Acquiror within five (5) days of the execution of
this Agreement, and such Schedules and documents shall have been
19
\PHILA2\63461_6
reasonably acceptable to RCM and Acquiror.
(p) Officer's Certificate. On or prior to the Closing Date, Acquiree
shall deliver an officer's certificate to RCM and Acquiror to the effect
that all of the representations and warranties contained in this Agreement
are true and complete in all respects as of the Closing Date, and that the
Acquiree has complied in all material respects with its covenants and
agreements set forth herein required to be complied with by the Closing;
and there shall be delivered to RCM and Acquiror a certificate signed by
the Acquiree Shareholders to the effect that the representations and
warranties of the Acquiree Shareholders set forth herein are true and
correct in all material respects.
(q) Prudential Options. On or prior to the Closing Date, Acquiree and
Acquiree Shareholders shall have caused either (i) the termination of the
Prudential Options or (ii) the exercise of the Prudential Options and, in
that event, the resulting shareholders that exercised the Prudential
Options shall enter into an amendment to this Agreement whereby these
shareholders shall become Acquiree Shareholders and become bound by all of
the terms of this Agreement as though such shareholder had originally
executed this Agreement.
(r) Resignations. On or prior to the Closing Date, Acquiree and
Acquiree Shareholders shall take all actions necessary to secure and effect
the resignation of all of the current directors and officers of Acquiree.
(s) Interim Operations of Acquiree. During the period from the date of
this Agreement and continuing until the Closing Date, Acquiree agrees
(except as expressly contemplated by this Agreement, including any Exhibits
and Schedules hereto, or to the extent that RCM shall otherwise consent in
writing) that:
(i) Ordinary Course. Acquiree shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use
all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers and
others having business dealings with it;
(ii) Dividends; Changes in Stock. Acquiree shall not (a) declare or
pay any dividend, on, or make other distributions in respect of, any of its
capital stock, (b) split, combine or reclassify any of its capital stock or
issue, authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of capital stock of Acquiree
or (c) repurchase or otherwise acquire any shares of capital stock of
Acquiree.
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(iii) Issuance of Securities. Acquiree shall not sell, issue,
authorize or propose the sale or issuance of, or purchase or propose the
purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such
shares or other convertible securities, except pursuant to the Prudential
Options, to the extent they may be exercised.
(iv) Governing Documents. Acquiree shall not amend its Certificate of
Incorporation or its Bylaws.
(v) No Acquisition. Acquiree shall not acquire or agree to acquire by
merging or consolidation with, or by purchasing a substantial portion of
the assets or securities of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets that
are material, individual or in the aggregate, to Acquiree.
(vi) No Dispositions. Acquiree shall not sell, lease or otherwise
dispose of or agree to sell, lease or otherwise dispose of, any of its
assets that are material, individually or in the aggregate, to Acquiree,
except in the ordinary course of business consistent with prior practice.
(vii) Indebtedness. Acquiree shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of Acquiree or guarantee any debt securities of others than in
the ordinary course of business consistent with prior practice.
(viii) Benefit Plans, Etc. Acquiree shall not adopt or amend in any
material respect any collective bargaining agreement or employee benefit
plan.
(ix) Executive Compensation. Acquiree shall not grant to any executive
officer or key employee, any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer or key employee.
(x) Other Actions. Acquiree shall not enter into any agreement or
arrangement to do any of the foregoing. Acquiree shall not take any action,
or fail to take any action, that is reasonably likely to result in any of
the representations and warranties of Acquiree set forth in this
Agreement becoming untrue.
(xi) Maintenance of Certain Financial Covenants.
(A) The Acquiree shall maintain and remain in compliance with the
following financial covenants between the date hereof and through and upon
the Closing Date:
21
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(1) The total "accounts receivable" of Acquiree (defined as those bona
fide accounts receivable representing the sales prices of goods,
merchandise or services sold or performed by Acquiree in valid transactions
in the normal course of Acquiree's business; which accounts receivable are
not uncollectible or subject to offset or counterclaim or otherwise in
controversy and which accounts receivable are not unpaid for more than
ninety (90) days after the date of original invoice) shall at all times
remain not less than 117.5% of the total indebtedness of Acquiree exclusive
of accounts payable (trade);
(2) Acquiree shall maintain a "tangible net worth" (defined as the sum
of capital stock and additional paid-in-capital plus any retained earnings
[or minus any accumulated deficit] less the book value attributed to all
intangible assets) of no lower than ($65,000);
(3) Acquiree shall maintain "working capital" (defined as current
assets less current liabilities) of at least $760,000;
(4) The ratio of the Acquiree's current assets to its current
liabilities shall not be less than 1.25 to 1.
(b) For the purposes of subparagraph (a) above, unless the context
otherwise requires, the terms utilized therein shall have the respective
meanings accorded to them under generally accepted accounting principles
applied in a manner consistent with the most recent audited financial
statements of Acquiree.
22
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7. Closing Date. The closing ("Closing") of the Merger shall take
place (a) within thirty (30) days of the execution of this Agreement,
unless such Closing cannot be accomplished as a result of either (i)
Acquiror being unable to secure financing from its principal lender for a
reason a beyond Acquiror's control or (ii) in light of all reasonable
efforts by RCM and/or Acquiror the due diligence required under this
Agreement has not been completed, and in such event of either of the above,
the Closing shall be extended an additional thirty (30) days, (b) at the
offices of Clark, Ladner, Fortenbaugh & Young, 2005 Market Street, 22nd
Floor, Philadelphia, PA 19103, 10:00 a.m, local time within sixty days from
the date of the execution by all parties of this Agreement, or (c) at such
other time and place and on such other date as RCM, the Acquiror and
Acquiree or Acquiree Shareholders shall agree. The date of the Closing is
referred to herein as the "Closing Date."
8. Conditions Precedent to Obligations of Acquiree and Acquiree
Shareholders. All obligations of the Acquiree and the Acquiree Shareholders
under this Agreement are subject to the fulfillment, prior to or on the
Closing Date (unless otherwise stated herein), of each of the following
conditions, any one or all of which may be waived by the Acquiree or the
Acquiree Shareholders:
(a) The Board of Directors of RCM and the Board of Directors and RCM
as sole shareholder of the Acquiror shall have approved the execution of
this Agreement and the Merger thereby.
(b) The representations and warranties made by or on behalf of the
Acquiror and RCM contained in this Agreement or in any certificate or
document delivered to the Acquiree or the Acquiree Shareholders pursuant to
the provisions hereof at the Closing Date shall be true in all material
respects at and as of the time of the Closing Date as though such
representations and warranties were made at and as of such time.
(c) RCM and the Acquiror shall have performed and complied in all
material respects with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing.
(d) RCM and the Acquiror shall have delivered all of the Schedules
required herein, and copies of the documents referred to therein, to the
Acquiree and such Schedules and documents shall have been reasonably
acceptable to Acquiree.
(e) There shall be delivered to the Acquiree and the Acquiree
Shareholders an officer's certificate of RCM and the Acquiror to the effect
that all of the representations and warranties of RCM and the Acquiror set
forth herein are true and complete in all material respects as of the
Closing Date, and that RCM and the Acquiror have complied in all material
respects with their covenants and agreements set forth herein that are
required to be complied with by the Closing Date.
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\PHILA2\63461_6
(f) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority
that prohibits or restricts the consummation of the Merger or the related
transactions.
(g) RCM and/or Acquiror and/or a lender to one or both of them shall
have confirmed to the satisfaction of the Acquiree and the Acquiree
Shareholders that funds are available to refinance in full the indebtedness
of the Acquiree now guaranteed by the Acquiree Shareholders, which
refinancing shall be accomplished on the Closing Date.
(h) Trading in the stock of RCM shall not have been suspended for any
reason other than suspension of a market generally, and no materially
adverse change, other than as otherwise disclosed in the RCM Reports, shall
have occurred in the financial condition, operations or prospects of RCM or
Acquiror after the date hereof, but prior to the Closing Date.
9. Conditions Precedent to Obligations of RCM and Acquiror. All
obligations of RCM and Acquiror, which obligations shall be undertaken in
good faith, under this Agreement are subject to the fulfillment, prior to
or on the Closing Date, of each of the following conditions, any one or all
of which may be waived in writing by RCM or Acquiror:
(a) The Board of Directors of the Acquiree and the Acquiree
Shareholders shall have approved the execution of this Agreement and the
Merger thereby.
(b) The representations and warranties by the Acquiree and the
Acquiree Shareholders contained in this Agreement or in any certificate or
document delivered to RCM and Acquiror pursuant to the provisions hereof
shall be true in all respects at and as of the time of the Closing as
though such representations and warranties were made at and as of such
time.
(c) The Acquiree and the Acquiree Shareholders shall have performed
and complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
them prior to or upon the Closing Date.
(d) The Acquiree shall have delivered all of the Schedules required
herein, and copies of the documents referred to therein, to RCM and
Acquiror and such Schedules and documents shall have been reasonably
acceptable to RCM and Acquiror.
(e) There shall be delivered to RCM and Acquiror an officer's
certificate of the Acquiree to the effect that all of the representations
and warranties of the Acquiree set forth herein are true and complete in
all respects as of the Closing Date, and that the Acquiree has complied in
all material respects with its covenants and agreements set forth herein
required
24
\PHILA2\63461_6
to be complied with by the Closing; and there shall be delivered to
RCM and Acquiror a certificate signed by the Acquiree Shareholders to the
effect that the representations and warranties of the Acquiree Shareholders
set forth herein are true and correct in all material respects.
(f) RCM and Acquiror shall have completed prior to the Closing Date,
to its satisfaction, a due diligence review of the financial condition,
results of operations, properties, assets, liabilities, business or
prospects of the Acquiree, and which review shall not produce information
which is either: (i) in conflict with prior representations of Acquiree
Shareholders or management of Acquiree; or (ii) is likely to present facts
which, management of Acquiror believes will have an adverse impact upon the
expected combined results of operations and financial statement data
relative to the Acquiror following the Merger.
(g) RCM shall have obtained the approval of its principal lender of
this Agreement and the Merger contemplated thereby and to provide
refinancing of the existing indebtedness and line of credit reflected
within the Financial Statements of Acquiree.
(h) Acquiror or RCM shall have entered into a lease on satisfactory
terms and conditions with respect to the facilities utilized in the
operations of Acquiree.
(i) On or before the Closing Date, Acquiree and Acquiree Shareholders
shall have caused either (i) the termination of the Prudential Options or
(ii) the exercise of the Prudential Options and, in that event, the
resulting shareholders that exercised the Prudential Options shall enter
into an amendment to this Agreement whereby these shareholders shall become
Acquiree Shareholders and be bound by all of the terms of this Agreement as
though such shareholder had originally executed this Agreement.
(j) Acquiree shall not have any "built-in gains" or other corporate
level tax from the termination of its "S"-Corporation status upon
completion of the Merger.
(k) Acquiree and Acquiree Shareholders shall take all actions
necessary to effect the resignation of all of the current directors and
officers of Acquiree and execute releases in form and substance reasonably
satisfactory to RCM.
(l) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental
authorities and agencies, as are required under this Agreement, applicable
law or any applicable contract or agreement (other than as contemplated by
this Agreement) to complete the Merger shall have been secured, including,
without limitation that this Agreement shall have been approved by the
affirmative vote of the Acquiree Shareholders.
25
\PHILA2\63461_6
(m) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority
that prohibits or restricts the consummation of the Merger or the related
transactions.
(n) RCM shall be satisfied that the offer and issuance of the Merger
Shares is exempt from the registration provisions of the Securities Act and
similar provisions under applicable state securities laws; provided,
however, that RCM agrees to use its best efforts to cause such offer and
issuance to qualify for an exemption from such registration provisions.
(o) RCM and Acquiror shall have secured satisfactory releases on
behalf of Acquiree from and against any claims of each of the Acquiree
Shareholders relating to matters which arose prior to the Closing Date.
(p) Acquiree Shareholders shall execute a Registration Rights
Agreement substantially in form and substance similar to that attached
hereto and made a part hereof as Exhibit "B".
(q) Acquiree Shareholders shall execute a Voting Trust Agreement
substantially in form and substance similar to that attached hereto and
made a part hereof as Exhibit "C".
(s) Acquiree Shareholders shall execute a Pledge Agreement substantially
in form and substance similar to that attached hereto and made a part
hereof as Exhibit "E".
10. Conditions Subsequent.
10.1 Distribution of "Subchapter S" Dividends. Within 45 days after
the Closing Date, RCM, Acquiror and Acquiree Shareholders shall jointly
cooperate in connection with the preparation of financial statements which
reflect the results of operations of the Acquiree from the beginning of its
most recent fiscal year until the Closing Date. RCM, Acquiror and Acquiree
Shareholders acknowledge that the Acquiree Shareholders have heretofore
withdrawn from the Acquiree that amount representing earnings of the
Acquiree from the inception of its most recent fiscal year through a period
prior to the Closing Date. Within 10 days after the completion of the
aforesaid financial statements, RCM and/or Acquiror shall distribute to the
Acquiree Shareholders the "Subchapter S" dividends representing earnings of
the Acquiree from the inception of its most recent fiscal year through and
including the Closing Date upon which the Acquiree Shareholders have been
or will be subject to individual taxation, but which dividends were not
otherwise
26
\PHILA2\63461_6
withdrawn from the business or paid by the Acquiree through the
Closing Date. To the extent that such financial statements reflect that the
Acquiree Shareholders have heretofore withdrawn an amount in excess of the
cumulative earnings of the Acquiree from the date of its most recent fiscal
year through the Closing Date, then any and all such amounts withdrawn in
excess of the earnings of the Acquiree shall be immediately repaid to the
Acquiror.
10.2 Obligation to Maintain Cumulative Gross Revenues Following the
Closing Date.
(a) The cumulative gross revenues of Acquiror (as the successor to the
business of Acquiree) for the period of the three consecutive years
following the Closing Date (the "Cumulative Gross Revenues") shall be at
least two hundred and seventy (270%) percent of those revenues realized by
the Acquiree during its fiscal year ended october 2, 1994 (the "Base Period
Revenues").
(b) RCM and the Acquiree Shareholders do hereby agree that it may be
difficult to accurately determine the actual amount of damages that RCM may
incur if Acquiror (as the successor to the business of Acquiree) fails to
achieve Cumulative Gross Revenues of at least two hundred and seventy
(270%) percent of the Base Period Revenues. Accordingly, it is agreed that
to the extent that the Cumulative Gross Revenues of the Acquiror (as the
successor to the business of Acquiree) are less than two hundred and
seventy (270%) percent of the Base Period Revenues, the Acquiree
Shareholders do hereby jointly and severally agree to pay to RCM without
demand, within forty- five (45) days of the third anniversary of the
Closing Date, liquidated damages in the following amounts.
Cumulative Gross Revenues Amount of
as Compared to Liquidated
Base Period Revenues: Damages :
255% - 269.9% . . . . . . . . . . .$ 300,000
240% - 254.9% . . . . . . . . . . .$ 600,000
225% - 239% . . . . . . . . . . . .$ 900,000
Less than 225% . . . . . . . . . .$1,200,000
It is further agreed to and acknowledged by the Acquiree
Shareholders that the amount of liquidated damages set forth above is
reasonable and not a punitive amount based upon the facts and
circumstances of the parties at the time of this Agreement.
(c) The liability to pay liquidated damages, as set forth at
subparagraph 10.2(b) above, shall be of recourse limited to the Merger
Shares pledged by the Acquiree Shareholders to RCM in the manner and
to the extent set forth within the Pledge Agreement attached hereto
and made a part hereof as Exhibit "E."
27
\PHILA2\63461_6
(d) For the purposes hereof, the term "Cumulative Gross Revenues"
of Acquiror (as the successor to the business of Acquiree) shall in
all events include the sales receipts derived from or relating to the
operations of the business of Acquiror (as the successor to the
business of Acquiree) as such business is presently undertaken by
Acquiree by location, industry segment, product or service line and/or
customer base. In connection therewith, RCM and Acquiror will utilize
their best efforts following the Merger to preserve, protect, expand
and develop the historic business, customer base and goodwill of
Acquiree and covenants not to directly or indirectly employ any device
as a means by which to allocate revenue associated with the historic
business of Acquiree to any other affiliate or member of the
consolidated group for which RCM serves as a parent. The Acquiror
shall further provide to the Acquiree Shareholders, without demand,
financial reports detailing the calculation of Cumulative Gross
Revenues as used herein (i) for each of the Acquiror's fiscal quarters
ending after the Closing Date through and until the date three (3)
years after the Closing Date, such reports to be delivered to the
Acquiree Shareholders within forty-five (45) days after the end of
each applicable fiscal quarter and for each of the Acquiror's fiscal
years ending after the Closing Date through and until the date three
(3) years after the Closing Date, such reports to be delivered to the
Acquiree Shareholders within ninety (90) days after the end of each
applicable fiscal year. The Acquiror shall provide such additional
information to the Acquiree Shareholders as the Acquiree Shareholders
may reasonably request respecting the calculation of Cumulative Gross
Revenues as so reported and the efforts of RCM and Acquiror to comply
with their obligations under this Agreement.
10.3 Confidentiality. Acquiree Shareholders acknowledge and agree
that the operations, methods, customer list, trade secrets and other
confidential or proprietary information of Acquiree are valuable,
special and unique. Acquiree Shareholders further acknowledge that the
Acquiree's confidential trade and other proprietary information was
one of the principal assets being acquired by Acquiror pursuant to
this Merger. Acquiree Shareholders shall keep confidential any trade
secrets, confidential or proprietary information of Acquiree which are
now known to Acquiree Shareholders or which hereafter may become known
to Acquiree Shareholders and shall not at any time, directly or
indirectly, disclose any such information to any person, firm or
corporation other than Acquiree except to the extent that such
information is requested by a governmental entity, lawyer, accountant,
or other advisor on a need to know basis for arbitration, litigation
or pursuant to a court order. For purposes of this Section 10.3,
"trade secrets or other confidential or proprietary information" shall
mean information (i) which is unique to Acquiree or which has a
significant business purpose and is not known or available for sources
outside the Acquiree or from typical industry practice including, but
not limited to, customer information and client list of Acquiree, and
(ii) the disclosure of which would have a material adverse effect on
Acquiree (herein referred to collectively as the "Proprietary
Property"). Acquiree Shareholders shall have no right, title or
interest of any kind or nature in the Proprietary Property or any
proceeds thereof following the Closing except to the extent such
28
\PHILA2\63461_6
information is necessary to assist Acquiree Shareholders in the
preparation of their tax returns as such returns include dividends
earned from Acquiror. The Proprietary Property shall thereafter remain
the sole and exclusive property of Acquiree. Notwithstanding anything
contained in this Section 10.3, no Acquiree Shareholder shall be
liable for a breach by another Acquiree Shareholder of this Section
10.3 after the Closing Date.
10.4 Restrictive Covenant. For the purposes of this Section 10.4,
"Business" shall mean the business operated by the Acquiree as of the
date of this Agreement. Except as specifically permitted elsewhere
herein, at any time during the five (5) year period following the
Closing Date (the "Restrictive Period"), no Acquiree Shareholder may
directly or indirectly: (i) own, manage, operate, control, be employed
by, participate in or be connected in any manner with the ownership,
management, operation or control of any business, person or entity
competitive with Acquiror's Business; (ii) without the expressed
written consent of Acquiror, act as an organizer, be employed by or
act as an independent contractor to any business, person or entity
involved in a business competitive with Acquiror's Business. Moreover,
during the Restrictive Period, no Acquiree Shareholder may contact,
directly or indirectly, or cause to be contacted directly or
indirectly, any client or customers of Acquiror for the purpose of
competitively soliciting business in competition with Acquiror's
Business. Acquiree Shareholders further agree that during the
Restrictive Period no Acquiree Shareholder will directly or indirectly
induce employees of Acquiror to either accept employment from, or to
engage in any activities with, a business that is in competition with
Acquiror. Notwithstanding the restrictions in this Section 10.4, the
activities and affiliation of Joseph Marubbio in connection with
Energy and Environmental Management Incorporated and National
Association of Drug Free Employees, a subchapter "S" corporation
("NADE"), Robert Starer's connection with NADE and James Affleck's
connection with NADE, as such activities and affiliations of Messrs.
Marubbio, Starer and Affleck are disclosed on Schedule 10.4, shall be
permitted under this Section. Additionally, notwithstanding anything
contained in this Section 10.4, no Acquiree Shareholder shall be
liable for a breach by another Acquiree Shareholder of this Section
10.4 after the Closing Date.
10.5 Remedies. Acknowledging that a breach of any provisions of
Sections 10.3 and 10.4 may cause substantial injury to Acquiror which
may be irrevocable and/or damages in an amount difficult or impossible
to ascertain, Acquiree Shareholders do hereby jointly and severally
agree that in the event that of the breach of any of the provisions of
Section 10.3 or 10.4 hereof, Acquiror shall have, in addition to all
other remedies (including but not limited to recovery of damages at
all costs and reasonable fees incurred by Acquiror) available in the
event of a breach of this Agreement, the right to injunctive or other
equitable relief. Acquiree Shareholders hereby waive the claim or
defense that the Acquiror has an adequate remedy at law for any such
breach of Sections 10.3 or 10.4 and covenant and agree that Acquiree
Shareholders will not assert such claim or defense in any action or
proceeding to enforce this provisions. The parties agree and
acknowledge that they are
29
\PHILA2\63461_6
familiar with the present and proposed operations of
Acquiror and believe that the restrictive covenant set forth in
Section 10.4 is reasonable with respect to this subject matter,
duration and geographical application.
10.6 Severability. The parties expressly agree and
acknowledge that they are familiar with all of the terms and
conditions of this Agreement and believe, after consulting with
their respective attorneys, that the covenants set forth above
are reasonable. If, notwithstanding such agreement and
acknowledgement, a final, non-appealable judgment of a court of
competent jurisdiction determines that any such covenant is
unenforceable, then such covenant shall be reformed by reducing
the time period, geographical area, or both, to make the covenant
enforceable.
11. Indemnification.
(a) Acquiree Shareholders. Commencing from the execution of
this Agreement and continuing until the fourth annual anniversary
of the execution of this Agreement, Acquiree Shareholders (except
James R. Affleck, Jr. and Sarah B. Affleck (the "Afflecks"), who
shall not be liable under this Section 11 or under any other
provisions hereof, except to the extent of their Merger Shares
pledged under the Pledge Agreement) jointly and severally shall
indemnify, defend and hold harmless` RCM and Acquiror from and
against any and all demands, claims, actions or causes of action,
judgments, assessments, losses, liabilities, damages or penalties
and reasonable attorneys' fees and related disbursements
(collectively, "Claims"), of which notice of such Claims must be
given to Acquiree Shareholders prior to the fourth year
anniversary of the execution of this Agreement, incurred by RCM
or Acquiror which arise out of or result from a
misrepresentation, breach of warranty, or breach of any covenant
of Acquiree or Acquiree Shareholders contained herein or in the
Schedules annexed hereto or in any deed, exhibit, closing
certificate, schedule or any ancillary certificates or other
documents or instruments furnished by the Acquiree or Acquiree
Shareholders pursuant hereto or in connection with the
transactions contemplated hereby or thereby. Notwithstanding the
preceding sentence, the liability of the Acquiree Shareholders,
excluding the Afflecks, arising from this Agreement, the Merger
or transactions related thereto shall be limited to the total
amount of Merger Consideration. Except with respect to Sections
4(ab), 10.2, 10.3 and 10.4, (for which the foregoing limitation
shall not apply), neither the Acquiree nor the Acquiree
Shareholders shall be liable to the Acquiror or to RCM under this
indemnity provision or otherwise under this Agreement or any
related document in connection with the Merger unless the Claim
or Claims outstanding against them exceed specified amounts as
described below:
(i) Upon the Closing Date and through and until the end of
the first annual anniversary of the Closing Date, RCM and/or
Acquiror shall be liable for any Claims, singularly or in the
aggregate equal an amount up to and including twenty-five
thousand dollars ($25,000) ("First Year Amount"). Any amount of
the Claims which exceed twenty-five thousand dollars ($25,000)
shall be the responsibility of Acquiree Shareholders;
30
\PHILA2\63461_6
(ii) Upon the commencement of the second year following the
Closing Date, through and until the end of the second annual
anniversary of the Closing Date, RCM and/or Acquiror shall be
liable in an amount equal to any unused portion of the First Year
Amount, plus an additional twenty-five thousand dollars ($25,000)
(collectively, "Second Year Amount"). Any amount of the Claims
which exceed the Second Year Amount shall be the responsibility
of the Acquiree Shareholders;
(iii) Upon the commencement of the third year following the
Closing Date, through and until the end of the third annual
anniversary of the Closing Date, RCM and/or Acquiror shall be
liable in an amount equal to any unused portion of the Second
Year Amount plus an additional twenty-five thousand dollars
($25,000) (collectively, "Third Year Amount"). Any amount of the
Claims which exceed the Third Year Amount shall be the
responsibility of the Acquiree Shareholders;
(iv) Upon the commencement of the fourth year following the
Closing Date, through and until the end of the fourth annual
anniversary of the Closing Date, RCM and/or Acquiror shall be
liable in an amount equal to any unused portion of the Third Year
Amount plus an additional twenty-five thousand dollars ($25,000)
(collectively, "Fourth Year Amount"). Any amount of the Claims
which exceed the Fourth Year Amount shall be the responsibility
of the Acquiree Shareholders.
(b) RCM and Acquiror. RCM and Acquiror shall jointly and
severally indemnify, defend and hold harmless Acquiree and
Acquiree Shareholder from and against any and all Claims incurred
by the Acquiree and/or any Acquiree Shareholder which arise out
of or result from a misrepresentation, breach of warranty or
breach of any covenant of RCM or Acquiror contained herein or in
any ancillary certificates or other documents or instruments
furnished by RCM or Acquiror pursuant hereto.
(c) Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted
as follows:
(i) Third Party Claims. In the event that any Claim for
which a party (the "Indemnitee") would be entitled to
indemnification under this Agreement is asserted against or
sought to be collected from the Indemnitee by a third party the
Indemnitee shall promptly notify the other party (the
"Indemnitor") of such Claim, specifying the nature thereof, the
applicable provision in this Agreement or other instrument under
which the Claim arises, and the amount or the estimated amount
thereof (the "Claim Notice"). The Indemnitor shall have thirty
(30) days (or, if shorter, a period to a date not less than ten
(10) days prior to when a responsive pleading or other document
is required to be filed but in no event less than ten (10) days
from delivery or mailing of the Claim Notice) (the "Notice
Period") to notify the Indemnitee (a) whether or not it disputes
the Claim and (b) if liability hereunder is not disputed, whether
or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate
31
\PHILA2\63461_6
proceedings, such proceedings shall be promptly settled or
prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of
such proceedings and the amount of any judgment shall be paid by
the Indemnitor.
If the Indemnitee desires to participate in, but not
control, any such defense or settlement, it may do so at its sole
cost and expense. If the Indemnitor has disputed the Claim, as
provided above, and shall not defend such Claim, the Indemnitee
shall have the right to control the defense or settlement of such
Claim, in its sole discretion, and shall be reimbursed by the
Indemnitor for its reasonable costs and expenses of such defense
if it shall thereafter be found that such Claim was subject to
indemnification by the Indemnitor hereunder.
(ii) Non-Third Party Claims. In the event that the
Indemnitee has or may have a Claim for indemnification hereunder
which does not involve a Claim being asserted against it or
sought to be collected by a third party, the Indemnitee shall
promptly send a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee
within the Notice Period that it disputes such Claim, the
Indemnitor shall pay the amount thereof to the Indemnitee. If the
Indemnitor disputes the amount of such Claim, the liability of
the Indemnitor shall be determined under the rules of dispute
resolution and arbitration established at paragraph [14(o)]
hereafter.
12. Documents at Closing. Upon the Closing Date, the
following transactions shall occur, all of such transactions
being deemed to occur simultaneously:
(a) the Acquiree and Acquiree Shareholders will deliver, or
cause to be delivered, to the Acquiror and RCM the following:
(i) stock certificates for the Acquiree Shares being
surrendered hereunder, duly endorsed with stock powers attached
in blank;
(ii) all corporate records of the Acquiree, including
without limitation corporate minute books (which shall contain
copies of the Articles of Incorporation and Bylaws, as amended to
the Closing Date), stock books, stock transfer books, corporate
seals; and such other corporate books and records as may
reasonably be requested by the Acquiror and its counsel;
(iii) a certificate executed by the Acquiree and the
Acquiree Shareholders to the effect that all representations and
warranties made by the Acquiree and Acquiree Shareholders under
this Agreement are true and correct in all material respects as
of the Closing Date, as though originally given to Acquiror on
said date;
(iv) a certificate and such related schedules and financial
statements prepared and executed by the Chief Financial Officer
of
32
\PHILA2\63461_6
Acquiree and executed by Acquiree Shareholders evidencing
compliance with the financial covenants set forth at paragraph
6(s)(xi) herein.
(v) a certificate of good standing for the Acquiree from the
Secretary of the Commonwealth of Pennsylvania, dated at or about
the Closing Date, to the effect that such corporation is in good
standing under the laws of such state;
(vi) an incumbency certificate for the Acquiree signed by
all of the officers thereof dated at or about the Closing Date;
(vii) certified Articles of Incorporation of the Acquiree
dated at or about the Closing Date and a copy of the Bylaws of
the Acquiree certified by the Secretary of the Acquiree dated at
or about the Closing Date;
(viii) certified resolutions from the Secretary of the
Acquiree dated at or about the Closing Date authorizing the
transactions contemplated under this Agreement;
(ix) resignations of all directors and executive officers,
including Robert Starer, Joseph Marubbio and James Affleck.
(x) the Registration Rights Agreement described in Exhibit
"B" signed by each of the Acquiree Shareholders;
(xi) the Voting Trust Agreement described in Exhibit "C",
signed by each of the Acquiree Shareholders and the voting
trustee;
(xii) the Investor Representation Letter described in
Exhibit "D" signed by each of the Acquiree Shareholders;
(xiii) the Pledge Agreement described in Exhibit "E" signed
by each of the Acquiree Shareholders;
(xiv) such documents as may be needed to accomplish the
Merger under the corporate laws of the states of incorporation of
the Acquiror and Acquiree;
(xv) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions
of this Agreement or that may be reasonably requested in
furtherance of the provisions of this Agreement; and
(xvi) an opinion of counsel in form and substance
satisfactory to RCM and the Acquiror.
(b) the Acquiror will deliver or cause to be delivered to
the Acquiree Shareholders:
33
\PHILA2\63461_6
(i) cash or separate cashier's check drawn on a bank located
in Philadelphia, Pennsylvania in an aggregate amount equal to Two
Million Dollars ($2,000,000);
(ii) a certificate of the Acquiror's and RCM's President to
effect that all representations and warranties of the Acquiror
and RCM under this Agreement are reaffirmed on the Closing Date,
as though originally given to the Acquiree and the Acquiree
Shareholders on said date;
(iii) certificates from the Secretary of State of Nevada and
the Commonwealth of Pennsylvania dated at or about the Closing
Date that RCM and the Acquiror, respectively, are in good
standing under the laws of said states;
(iv) certified resolutions of the Secretary of the Acquiror
dated at or about the Closing Date authorizing the transactions
contemplated under this Agreement;
(v) an opinion of counsel in form and substance satisfactory
to the Acquiree and the Acquiree Shareholders;
(vi) such documents as may be needed to accomplish the
Merger under the corporate laws of the states of incorporation of
the Acquiror and Acquiree;
(vii) the Articles of Merger to be filed with the Secretary
of State of the Commonwealth of Pennsylvania as required under
Section 1926 of the PBCL; and
(viii) such other instruments, documents and certificates,
if any, as are required to be delivered pursuant to the
provisions of this Agreement, or that may be reasonably requested
in furtherance of the provisions of this Agreement.
(c) The Acquiror shall cause to be filed with the Secretary
of State of the Commonwealth of Pennsylvania, on the Closing Date
or as soon thereafter as practicable, an Amendment to the
Acquiror's Articles of Incorporation to change the name of the
Acquiror to "Cataract, Inc."
13. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing Date:
(a) by mutual written consent of the board of directors of
RCM, Acquiror and Acquiree;
(b) by any of RCM, Acquiror and Acquiree:
(i) if the Merger shall not have occurred by the Closing
Date unless such date is extended by the mutual written agreement
of RCM,
34
\PHILA2\63461_6
Acquiror and Acquiree, and in such event, only until the
date the Closing Date has been so extended; provided, however,
that the right to terminate this Agreement under this Section
12(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause
of,or resulted in, the failure of the Closing Date to occur on or
before that date; or
(ii) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or
commission having appropriate jurisdiction shall have issued an
order, decree or filing or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by either of RCM or Acquiror upon a breach of this
Agreement by either Acquiree or Acquiree Shareholders, which
breach continues for ten (10) days after written notice thereof
is given to all parties, or by either of Acquiree or any Acquiree
Shareholder, upon a breach of this Agreement by either of RCM or
Acquiror, which breach continues for ten (10) days after written
notice thereof is given to all parties, in each case with
reservation of rights against the breaching party or parties for
indemnification for resulting damages as provided elsewhere
herein.
14. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to
have been duly given if delivered in person or sent by overnight
delivery, confirmed telecopy or prepaid first class registered or
certified mail, return receipt requested, to the following
addresses, or such other addresses as are given to the other
parties to this Agreement in the manner set forth herein:
(a) If to the Acquiror or RCM, to:
Mr. Leon Kopyt
Chief Executive Officer
RCM Technologies, Inc.
2500 McClellan Avenue, Suite 350
Pennsauken, New Jersey 08109-4613
with a courtesy copy to;
Stephen M. Cohen, Esq.
Clark Ladner Fortenbaugh & Young
One Commerce Square
2005 Market Street
Philadelphia, Pennsylvania 19103
Telephone Number: (215) 241-1800
Telecopy Number: (215) 241-1857
and
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Norman Berson, Esquire
Fineman & Bach, P.C.
1608 Walnut Street
Philadelphia, PA 19103
(b) If to the Acquiree Shareholders, to:
Robert L. Starer and Merle A. Starer
660 Newton-Yardley Road
Newtown, PA 18940
and
6555 Skyline Drive
Delray Beach, FL 33446
Joseph A. Marubbio and Paula Marubbio
12 North Road
Northport, NY 11768
James R. Affleck, Jr. and Sarah B. Affleck
948 Stony Lake
Gladwyne, PA 19035
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(c) If to the Acquiree, to:
Cataract, Inc.
c/o Robert L. Starer
660 Newtown Yardley Road
Newtown, PA 18940
Telephone Number: (215) 968-8808
with a courtesy copy to:
John E. Murdock III
Boult, Cummings, Conners & Berry
P.O. Box 198062
414 Union Street, Suite 1600
Nashville, TN 37219
Telephone Number: (615) 252-2359
Telecopier Number: (615) 252-2380
Any such notices shall be effective when delivered in person or sent by
telecopy, one business day after being sent by overnight delivery or three
business days after being sent by registered or certified mail. Any of the
foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of address shall be
effective only upon receipt.
15. Miscellaneous.
(a) Release and Discharge. By virtue of their execution of this
Agreement, as of the Closing Date and thereafter, the Acquiree Shareholders do
hereby jointly and severally agree to release, remise and forever discharge
Acquiree from and against any and all debts, obligations, liabilities and
amounts owing from the Acquiree to the Acquiree Shareholders, except for
Permitted Dividends, and the Acquiree is not obligated to take any action or
make any payments to third parties on behalf of any such Acquiree Shareholder.
Additionally, as of the Closing Date, the Acquiree agrees to release, remise
and forever discharge Acquiree Shareholders from and against any and all
debts, obligations, liabilities and amounts owing from the Acquiree
Shareholders to the Acquiree, only to the extent such release and discharge
does not conflict with any of the representations and warranties contained in
Section 4 of this Agreement.
(b) Further Assurances. At any time, and from time to time,
after the Closing Date, each party will execute such additional
instruments and take such further action as may be reasonably
requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
(c) Nature of Representations and Warranties. All of the
parties hereto are executing and carrying out the provisions of
this Agreement
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in reliance on the representations, warranties, covenants
and agreements contained in this Agreement or at the Closing of
the transactions herein provided for, and any investigation that
they might have made or any other representations, warranties,
covenants, agreements, promises or information, written or oral,
made by the other party or parties or any other person shall not
be deemed a waiver of any breach of any such representation,
warranty, covenant or agreement.
(d) Costs and Expenses. Each party hereto agrees to pay its
own costs and expenses incurred in negotiating this Agreement and
consummating the transactions described herein.
(e) Time. Time is of the essence.
(f) Survival of Representations. All covenants, agreements,
representations and warranties made herein shall survive the
Closing Date through all applicable statutes of limitation. All
covenants and agreements by or on behalf of the parties hereto
that are contained or incorporated in this Agreement shall bind
and inure to the benefit of the successors and assigns of all
parties hereto.
(g) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof. It supersedes all prior negotiations, letters and
understandings relating to the subject matter hereof.
(h) Amendment. This Agreement may not be amended,
supplemented or modified in whole or in part except by an
instrument in writing signed by the party or parties against whom
enforcement of any such amendment, supplement or modification is
sought.
(i) Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other
parties.
(j) Choice of Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania.
(k) Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this agreement.
(l) Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular
or plural as the context may require.
(m) Number and Gender. Words used in this Agreement,
regardless of the number and gender specifically used, shall be
deemed and construed to
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include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context indicates
is appropriate.
(n) Construction. The parties hereto and their respective
legal counsel participated in the preparation of this Agreement;
therefore, this Agreement shall be construed neither against nor
in favor of any of the parties hereto, but rather in accordance
with the fair meaning thereof.
(o) Effect of Waiver. The failure of any party at any time
or times to require performance of any provision of this
Agreement will in no manner affect the right to enforce the same.
The waiver by any party of any breach of any provision of this
Agreement will not be construed to be a waiver by any such party
of any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
(p) Severability. The invalidity, illegality or
unenforceability of any provision or provisions of this Agreement
will not affect any other provision of this Agreement, which will
remain in full force and effect, nor will the invalidity,
illegality or unenforceability of a portion of any provision of
this Agreement affect the balance of such provision. In the event
that any one or more of the provisions contained in this
Agreement or any portion thereof shall for any reason be held to
be invalid, illegal or unenforceable in any respect, this
Agreement shall be reformed, construed and enforced as if such
invalid, illegal or unenforceable provision had never been
contained herein.
(q) Arbitration.
(i) If a dispute,controversy or claim arises between any of
the parties to this Agreement including without limitation any
dispute, controversy or claim that arises out of or relates to
this Agreement or any other agreement or instrument between the
parties, or the breach, termination or invalidity of the
Agreement or any such other agreement or instrument, AND
including but not limited to a claim based on or arising out of a
claim for tortious interference or other tortious or statutory
claims arising before, during or after termination, and if said
dispute cannot be settled through direct discussions, the parties
agree to first endeavor to settle the dispute in an amicable
manner by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules, before
resorting to arbitration; provided, that nothing contained herein
shall preclude any party from commencing arbitration if said
mediation is not completed within 30 days of such party
requesting or agreeing to mediation. Thereafter, any unresolved
dispute, controversy or claim arising between the parties,
including without limitation any dispute, controversy or claim
that arises out of or relates to this Agreement or any other
agreement or instrument between the parties, or breach thereof,
AND including but not limited to a claim for tortious
interference or other tortious or statutory claims arising
before, during or after termination, shall be settled by
arbitration administered by the American Arbitration Association
in accordance with its Commercial Arbitration
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Rules (the "Rules"), and judgment upon any award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof. Any mediation or arbitration hereunder shall be pursuant
to the applicable rules of the American Arbitration Association
as set out above except to the extent expressly provided
otherwise in this Agreement.
(ii) The parties hereto expressly agree that any court with
jurisdiction may order the consolidation of any arbitrable
dispute,controversy or claim under this Agreement with any
related arbitrable dispute, controversy or claim not arising
under this Agreement, as the court may deem necessary int he
interests of justice or efficiency or on such other grounds as
the court may deem appropriate.
(iii) The site of the mediation and, if necessary, the
arbitration shall be in Philadelphia, Pennsylvania and shall take
place in the officers of the American Arbitration Association or
such other place as the parties may agree.
(iv) The parties agree that the Federal and state courts
located in the Commonwealth of Pennsylvania shall have exclusive
jurisdiction over an action brought to enforce the rights and
obligations created in or arising from this Agreement to
arbitrate, and each of the parties hereto irrevocably submits to
the jurisdiction of said courts. Notwithstanding the above,
application may be made by a party to any court of competent
jurisdiction wherever situated for enforcement of any judgment
and the entry of whatever orders are necessary for such
enforcement.
(v) Process in any action arising out of or relating to this
Agreement may be served on any party to the Agreement anywhere in
the world by delivery in person against receipt or by registered
or certified mail, return receipt requested.
(vi) Neither party nor the arbitrators may disclose the
existence, content, or results of any arbitration hereunder
without the prior written consent of both parties.
(vii) The parties agree that all questions concerning the
arbitrator's jurisdiction shall be decided by the arbitrator.
(viii) All fees and expenses of the arbitration (exclusive
of filing fees for claims and counterclaims) shall be borne by
the parties equally. Each party shall bear the expense of its own
counsel, experts, witnesses, and presentation of proofs.
(ix) This agreement to arbitrate is intended to be binding
upon the signatories hereto, their principals, successors,
assigns, subsidiaries or affiliates.
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(x) The arbitrator shall determine the rights and
obligations of the parties according to the substantive laws of
the Commonwealth of Pennsylvania (excluding conflicts of laws
principles).
(xi) The arbitrator is directed to consider any defense that
all or part of the claim is not timely by reason of laches or
statute of limitations as a preliminary issue and to render an
award determining the merits of such claim before considering the
substantive merits of the arbitration claim, unless the
arbitrator determines that the merits of such claim or laches or
statute of limitations is so intertwined with the substantive
merits of the arbitration claim as to make impractical the
determination of the claim of laches or limitations as a
preliminary matter.
(xii) The arbitrator shall hear and determine any
preliminary issue of law asserted by a party to be dispositive of
any claim, in whole or part, in the manner of a court hearing a
motion to dismiss for failure to state a claim or for summary
judgment, pursuant to such terms and procedures as the arbitrator
deems appropriate.
(xiii) It is the intent of the parties that, barring
extraordinary circumstances, any arbitration shall be concluded
within three months of the date the statement of claim is
received by the arbitrator. Unless the parties otherwise agree,
once commenced, hearings shall be held five days a week, four
weeks a month, with each hearing day to begin at 9:00 A.M. and to
conclude at 5:00 P.M. These time limits can be extended or
altered by an agreement by the parties or by a determination by
the arbitrator that such extension or alteration is in the
interests of justice. The arbitrator shall use his or her best
efforts to issue the final award or awards within a period of
thirty days after closure of the proceedings. Failure to do so
shall not be a basis for challenging the award.
(xiv) The procedures to be followed in any arbitration
hereunder shall be as prescribed herein and in such directives
that shall be issued by the arbitrator following consultation
with the parties. Unless otherwise agreed by the parties, the
procedures shall provide for the submission of briefs by the
parties the introduction of documents and the oral testimony of
witnesses, cross-examination of witnesses, oral arguments, the
closure of the proceedings and such other matters as the
arbitrator may deem appropriate. Further, the arbitrator shall
regulate all matters relating to the conduct of the arbitration
not otherwise provided for in this Agreement or in the Rules.
(xv) In the event a party, having been given notice and
opportunity, shall fail or shall refuse to appear or participate
in an arbitration hereunder or in any stage thereof, the
proceedings shall nevertheless be conducted to conclusion and
final award. Any award rendered under such circumstances shall be
as valid and enforceable as if both parties had appeared and
participated fully at all stages.
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(xvi) The parties agree that discovery shall be limited and
shall be handled expeditiously. Discovery procedures available in
litigation before the courts shall not apply in an arbitration
conducted pursuant to this Agreement. However, each party shall
produce relevant and non-privileged documents or copies thereof
requested by the other parties within the time limits set and to
the extent required by order of the arbitrator. All disputes
regarding discovery shall be promptly resolved by the arbitrator.
(xvii) It is the intent of the parties that the testimony of
witnesses be subject to cross-examination. It is agreed that the
direct testimony of a witness may be submitted by sworn
affidavit, provided that such affiant be subject to
cross-examination.
(xviii) Strict rules of evidence shall not apply in an
arbitration conducted pursuant to this Agreement. The parties may
offer such evidence as they desire and the arbitrator shall
accept such evidence as the arbitrator deems relevant to the
issues and accord it such weight as the arbitrator deems
appropriate.
(xix) No witness or party may be required to waive any
privilege recognized by law.
(r) Binding Nature. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the
parties hereto.
(s) No Third-Party Beneficiaries. No person shall be deemed
to possess any third-party beneficiary right pursuant to this
Agreement. It is the intent of the parties hereto that no direct
benefit to any third party is intended or implied by the
execution of this Agreement.
(t) Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and
all of which together will constitute one and the same
instrument.
(u) Facsimile Signature. This Agreement may be executed and
accepted by facsimile signature and any such signature shall be
of the same force and effect as an original signature.
(v) Prohibition on Trading in RCM Stock. The Acquiree and
Acquiree Shareholders acknowledge that the United States
Securities Laws prohibit any person who has received material
non-public information concerning the matters which are the
subject matter of this Agreement from purchasing or selling the
securities of the Acquiror, or from communicating such
information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or
sell securities of the Acquiror. Accordingly, the Acquiree
Shareholders agree that they will not purchase or sell any
securities of the Acquiror, or communicate such information to
any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell
securities of the
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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.
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IN WITNESS THEREOF, the parties have executed this Agreement on the date
first above written.
RCM TECHNOLOGIES, INC.
ATTEST
By:/s/STANTON REMER By: /S/LEON KOPYT
Secretary Name:LEON KOPYT
Title:PRESIDENT
CI ACQUISITION CORP.
ATTEST
By:/S/STANTON REMER By:/S/ LEON KOPYT
Secretary Name:LEON KOPYT
Title: PRESIDENT
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CATARACT, INC.
ATTEST
By: /S/JAMES R/ AFFLECK, JR By:/S/ ROBERT L.STARER
Secretary Name:ROBERT L. STARER
Title: CHAIRMAN OF BOARD
/S/ JOSEPH A. MARUBBIO
Joseph A. Marubbio
/S/ PAULA A. MARUBBIO
Paula Marubbio
/S/ ROBERT L. STARER
Robert L. Starer
/S/ MERLE A. STARER
Merle A. Starer
/S/ JAMES R. AFFLECK, JR
James R. Affleck, Jr.
/S/ SARAH B. AFFLECK
Sarah B. Affleck
45