Item 7. (c) Exhibits
STOCK PURCHASE AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
PROGRAMMING ALTERNATIVES OF MINNESOTA, INC.
AND
THE SHAREHOLDERS OF
PROGRAMMING ALTERNATIVES OF MINNESOTA, INC.
Dated as of January 7, 1997
TABLE OF CONTENTS
Page
1. DEFINITIONS...................................................... 1
2. PURCHASE AND SALE OF SHARES OF ACQUIREE.......................... 3
3.A. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND
ACQUIREE SHAREHOLDERS . . . . ................................... 4
4. REPRESENTATIONS AND WARRANTIES OF RCM............................13
5. COVENANTS OF THE PARTIES.........................................14
6. THE CLOSING......................................................20
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND
ACQUIREE SHAREHOLDERS............................................22
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM.......................23
9. INDEMNIFICATION....................... ..........................25
10. TERMINATION......................................................26
11. NOTICES..........................................................27
12. ARBITRATION......................................................28
13. MISCELLANEOUS....................................................29
LIST OF SCHEDULES
2.4
Persons eligible for earn out payments
3.A.2(a)
1993, 1994 and 1995 Financial Statements
3.A.3
Undisclosed Liabilities of Acquiree
3.A.4
Accounts Receivable of Acquiree
3.A.5
Material adverse changes
3.A.6
Litigation
3.A.8 Articles of Incorporation, and Bylaws
3.A.9
Tax information
3.A.10
All material Contracts and Agreements of Acquiree
3.A.11 Liens, encumbrances and general description of all real
property in which Acquiree has an ownership interest
3.A.12
Licenses, trademarks and trade names of Acquiree
3.A.13
Consents to be obtained by Acquiree
3.A.14
Capitalization of Acquiree
3.A.17
Xxxxxx-Xxxxx and the Trust's Obligation
3.A.18 Approvals required to be obtained by Acquiree
Shareholders
3.A.19 Number and names of employees and compensation of all
directors and officers of Acquiree -identifies all
employee benefit plans
3.A.20
Compliance with environmental and conservation laws
3.A.21
List of all insurance policies of Acquiree
3.A.22 List of all bank accounts maintained or for the benefit
of Acquiree
3.A.23 List of 10 largest customers of Acquiree, based on
dollar volume of income for Fiscal 1995
4.1
Articles of Incorporation and Bylaws of RCM
4.3
Consents to be obtained by RCM
5.15
List of employees eligible for award of stock options
LIST OF EXHIBITS
Exhibit
"A"
Promissory Note in favor of Trust
Exhibit "B" Promissory Note in favor of Xxxxxx-Xxxxx
Exhibit "C" Escrow Agreement with Trust
Exhibit
"D"
Escrow Agreement with Xxxxxx-Xxxxx
Exhibit
"E"
Employment Agreement with Xxxxx Xxxxx
Exhibit "F"
Directors Writing
Exhibit
"G"
Collection
Agreement
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement" ) is made and entered into
as of this 7th day of January, 1997, by and among RCM TECHNOLOGIES, INC., a
Nevada corporation ("RCM"); PROGRAMMING ALTERNATIVES OF MINNESOTA, INC., a
Minnesota corporation (the "Acquiree"); and those shareholders of Acquiree
identified in Section 1 of this Agreement (the "Acquiree Shareholders").
RECITALS:
WHEREAS, the Acquiree Shareholders own in the aggregate one hundred percent
(100%) of the issued and outstanding common stock of the Acquiree (the "Acquiree
Shares"); and
WHEREAS, the Acquiree Shareholders desire to sell the Acquiree Shares and RCM
desires to purchase the Acquiree Shares, each upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:
1.
DEFINITIONS.
(a)
The foregoing RECITALS are true and correct, and are incorporated herein and
made a part hereof.
(b)
For purposes of this Agreement, the terms set forth below shall have the
following meanings:
Acquiree . . . . . . . . Programming Alternatives of
Minnesota, Inc., a Minnesota
corporation.
Acquiree . . . . . . . Those individuals and entities
Shareholders . . . . . consisting of Xxxxxx Xxx Xxxxxx-
Xxxxx and The Xxxxx Xxxxx
and Xxxx Xxxxxx-Xxxxx
Trust, who in the aggregate
own 100% of the outstanding
capital stock of the
Acquiree.
Code . . . . . . The Internal Revenue Code of 1986,
as amended.
Closing . . . . . . . . The transaction of events set forth
in Section 6 hereof.
Closing Date . . The day on which the Closing is held
as set forth in Section 6 hereof.
Effective Closing Date . Commencement of business on November
4, 1996
Escrow Shares . . . . . 20% of the Acquiree Shares to be
delivered to escrow pursuant to
Section 2.2(b).
Financial . . . . . . . Unaudited financial statements of
Statements
the Acquiree for the
fiscal years ended December 31,
1995, December 31, 1994, and
December 31, 1993 prepared in
compliance with the requirements of
generally accepted accounting
principles.
Interim Financial . . . Unaudited financial statements of
Statements the Acquiree for the interim period
from January 1, 1996 through
November 30, 1996.
IRS . . . . . . . . . . Internal Revenue Service
Xxxxxx-Xxxxx . . . . .
.
Xxxxxx Xxx Xxxxxx-Xxxxx and the
and The Trust. . . . .
.
Xxxxx Xxxxx and Xxxx Xxxxxx-Xxxxx
Trust.
Net Operating Income. . Subsequent to the Effective Closing
NOI Date and with respect to the ongoing business formerly conducted by
Acquiree, gross revenues (billed services at invoice value reduced by customer
discounts, returns and allowances) minus direct operating expenses, cost of
sales and administrative expenses (including the salary of Xxxxx Xxxxx) and
Related Corporate Overhead but excluding: (a) any principal and interest
payments or accruals with respect to the Notes described in Section 2.3, any
Earn Out payments or accruals described in Section
2.4, and any payments or accruals by Acquiree resulting from a breach of
covenant, representation or warranty contained herein, provided RCM is eligible
for indemnification for such breach pursuant to Section 9 hereof; (b) federal
and state taxes; (c) any charge which is legislatively imposed for the first
time after the Closing Date.
RCM . . . . . . . . . . RCM Technologies, Inc., a Nevada
corporation.
Related Corporate .
.
All costs incurred at the corporate
Overhead. . . . . . . . level directly related to the ongoing business
conducted by Acquiree such as insurance, employment discrimination claims by
Acquiree's employees; legal fees for collection of delinquent accounts and the
like.
S Termination Date . . The date upon which the termination of the S
Corporation status of Acquiree is deemed effective for federal tax purposes.
Trust . . . . . . . . . The Xxxxx Xxxxx and Xxxx Xxxxxx- Xxxxx Trust dated
August 28, 1996.
Trustee . . . . . . . . That fiduciary serving from time to time following
proper appointment as Independent Special Trustee of The Xxxxx Xxxxx and Xxxx
Xxxxxx-Xxxxx Trust.
2.
PURCHASE AND SALE OF SHARES OF ACQUIREE.
2.1 Purchase and Sale of Shares of Acquiree. Subject to the terms and conditions
of this Agreement, on the Closing Date, the Acquiree Shareholders will sell,
convey, assign, transfer and deliver the Acquiree Shares to RCM, and RCM shall
purchase, acquire and accept from the Acquiree Shareholders the Acquiree Shares,
which shall constitute one hundred percent (100%) of the outstanding capital
stock of Acquiree.
2.2
Purchase Consideration.
(a)
On the Closing Date (i) Acquiree Shareholders shall deliver to RCM certificates
representing the Acquiree Shares; and (ii) RCM shall pay to each of the Acquiree
Shareholders in proportion to their shareholdings in Acquiree the purchase
consideration in the sum of $6,115,000 as follows:
$4,450,000 - by wire transfer of immediately available funds to bank
accounts designated by Acquiree Shareholders.
$1,381,250 - in the form of RCM's Promissory Note payable to the Trust in
the form attached hereto as Exhibit "A" and subject to the conditions described
in Section 2.3 hereof (the "Trust Note").
$ 243,750 - in the form of RCM's Promissory Note payable to Xxxx X.
Xxxxxx-Xxxxx in the form attached hereto as Exhibit "B" and subject to the
conditions described in Section 2.3 hereof (the "Xxxxx Note").
The Trust Note and the Xxxxx Note are hereinafter sometimes referred to
collectively as the "Notes".
$ 40,000 - by wire transfer of immediately available funds to bank accounts
designated by Acquiree Shareholders in consideration of their consent to be
bound by the terms and provisions of Section 5.5 hereof. (b) At the Closing RCM
shall deposit in escrow, in proportion to the
Acquiree Shareholder's shareholdings in Acquiree immediately prior to the
Closing hereunder the Escrow Shares pursuant to Escrow Agreements in the form
attached hereto as Exhibits "C" and "D". Subject to the provisions of Section
2.3(a) to (e) inclusive hereof, the Escrow Shares shall be deemed collateral to
ensure payment of the Notes, and the performance of RCM's obligations hereunder
or under any Exhibit or Schedule hereto and any documents executed and delivered
herewith.
2.3 Terms and Conditions of the Notes. The Notes shall
---------------------------------
be payable in three (3) annual installments, and paid as follows: $460,416.66
with respect to the Trust Note and $81,250.00 with respect to the Xxxxx Note,
with the first installment payable on November 1, 1997 and the remaining
installments on November 1 of each of the following two (2) years. No interest
shall accrue between the date of the Note and the due date of any installment
but upon the occurrence of an Event of Default as defined in the Note interest
shall accrue at the rate set forth in the Note.
(a)
In the event that the Net Operating Income (NOI) of Acquiree is less than
$1,000,000 (the "Baseline Amount") for any year (as hereafter defined) in which
an installment is payable pursuant to the Notes (the "Shortfall") then the
installment payable to each Acquiree Shareholder for that period shall be
reduced pro rata in proportion to their shareholdings in Acquiree as follows:
Period
Reduction
1st
year
$6.00 for each one dollar of Shortfall 2nd year $5.00 for each one dollar of
Shortfall 3rd year $4.00 for each one dollar of Shortfall
(b)
Notwithstanding that the Shortfall exceeds $90,278.00 in the first year,
$108,333.00 in the second year or $135,417.00 in the third year, Acquiree
Shareholders shall not have any obligation to pay any such excess.
(c)
Notwithstanding the existence of a Shortfall in any one or more
of the years in which installments are payable pursuant to the
Notes, if the aggregate NOI for the entire three (3) year period equals or
exceeds $3,000,000 then Acquiree Shareholders shall receive payment in full of
all amounts payable pursuant to the Notes.
(d)
Notwithstanding the existence of a Shortfall in any year, if, in a previous or
subsequent year during which payments are due pursuant to the Notes, the NOI for
such year exceeded the Baseline Amount, then the amount of any such excess may
be applied to the NOI for the year a Shortfall occurs in order to bring the NOI
up to the Baseline Amount.
(e)
As used in this Section 2.3 the term "year" shall mean the period commencing
November 1 and ending October 31.
(f)
Acquiree Shareholders and their authorized representatives during normal
business hours shall have the right to audit the financial records of Acquiree
to verify the accuracy of the calculation of (i) the NOI, and (ii) any
Shortfall. If such audit reveals a discrepancy in favor of Acquiree Shareholders
in the NOI or the Shortfall from that calculated by RCM, then RCM shall
reimburse the Acquiree Shareholders for the expenses of such audit provided such
discrepancy is resolved at the audit level. If suit or arbitration is instituted
to resolve the discrepancy then the losing party, after all appeals are
exhausted, shall pay the entire cost of the audit and the counsel fees and court
costs of the prevailing party.
(g)
So long as any payments are due or accrued with respect to the Notes or Earn-Out
pursuant to Section 2.4 hereof RCM promptly will furnish Acquiree Shareholders
with monthly profit and loss statements covering Acquiree's operations, and will
supply backup documentation and explanations of all profit and loss statement
entries or other financial statement entries upon request of any Acquire
Shareholder or any representative of same. The parties shall use their best
efforts and deal in good faith in an attempt to resolve any dispute regarding
the entries and/or the amounts
thereof.
2.4
Earn-Out Payments.
If the NOI for any year, (as defined in Section 2.3(e) hereof), in which a
payment is due pursuant to the Notes exceeds $1,000,000, then fifty percent
(50%) of the amount over and above and in excess of $1,000,000 shall be accrued
as additional consideration (the "Earn-Out"), and within sixty (60) days
following the third anniversary of the Effective Closing Date such accrued
amount shall be paid to those persons designated in Schedule 2.4 hereof in
accordance with the criteria set forth in that Schedule.
3.A. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND XXXXXX-XXXXX AND TRUST. The
Acquiree, Xxxxxx-Xxxxx and the Trust (but only as to Sections, 3.A.1, 3.A.6,
3.A.16, 3.A.17, 3.A.18, 3.A.26, 3.A.27, 3.A.28 and 3.A.29), jointly and
severally, as a material inducement to RCM to enter into this Agreement and
consummate the transactions contemplated hereby, make the following
representations and warranties to RCM which representations and warranties are
true and correct in all material respects at this date, and will be true and
correct in all material respects on the Closing Date as though made on and as of
such date.
3.A.1 Shareholders of Acquiree. The Acquiree Shareholders are, and will be on
the Closing Date, the sole owners, of record and beneficially, of all the issued
and outstanding shares of the Acquiree's capital stock.
3.A.2 Financial Statements.
(a) The Financial Statements have been attached as Schedule 3.A.2(a). The
Financial Statements and the Interim Financial Statements and the financial
information contained therein present fairly the financial condition of the
Acquiree for the periods covered and have been prepared in accordance with
generally accepted accounting principles, consistently applied.
(b) The books and records of Acquiree, financial and other, are in all material
respects complete and correct and have been maintained in accordance with good
business and accounting practices.
3.A.3 Undisclosed Liabilities. As of 11/3/96, Acquiree does not have any
liabilities or obligations of any nature, fixed or contingent, that will not be
shown or otherwise provided for in the 11/3/96 financial statement (a copy of
which RCM acknowledges receiving), except (a) as set forth on Schedule 3.A.3,
(b) for any tax liabilities incurred in connection with Acquiree's conversion
from an S Corporation to a C Corporation prior to Closing and the related change
from the cash method to the accrual method of accounting for federal income tax
purposes, and (c) for liabilities and obligations arising subsequent to December
31, 1995 through 11/3/96 in the ordinary course of business, none of such
liabilities referred to in this clause (c) will individually or in the aggregate
be materially adverse to the business or financial condition of the Acquiree.
Any liabilities of Acquiree which cause Acquiree to be in violation of its
representations set forth in this Section 3.A.3 may be set off against the
amount to be distributed pursuant to Section 5.14. There are no material loss
contingencies (as such term is used in statement of Financial Accounting
standards No. 5 of the Financial Accounting standards Board) of the Acquiree
that will not be adequately provided for.
3.A.4 Accounts Receivable. Attached hereto as Schedule 3.A.4 is a list of all
accounts receivable of Acquiree as of the close of business on November 3, 1996
and from November 4, 1996 to the Closing Date and aging schedule pertaining
thereto. All of the accounts receivable of Acquiree now and on the Closing Date,
are bona fide accounts receivable of Acquiree representing the sales price of
(or other sums or fees receivable for or in respect of) goods, merchandise, or
services sold or performed by Acquiree in valid transactions in the regular
course of its business to or for the benefit of its customers. Such accounts
receivable, subject to reserves, if any, established within the Financial
Statements, are not uncollectible or subject to offset or counterclaim or
otherwise in controversy.
3.A.5
Material Adverse Changes. Except as specifically stated in Schedule 3.A.5 or as
contemplated or required by this Agreement, from December 31, 1995 to the date
of this Agreement, the business of the Acquiree has been operated in the
ordinary course and there has not been:
(a) Any materially adverse changes in the business, condition (financial or
otherwise), results of operations, properties, assets, liabilities, earnings or
net worth of the Acquiree for such period or at any time during such period;
(b) Any material damage, destruction or loss (whether or not covered by
insurance) affecting the Acquiree or its assets, properties or business; (c) Any
cancellation or material breaches on any existing contract of which Acquiree is
a party that would have a material adverse effect on the business of Acquiree;
(d) To the knowledge of Acquiree and Acquiree Shareholders, any statute, rule,
regulation or order adopted by any governmental body, agency or authority that
materially and adversely affects the Acquiree or its business or financial
condition;
(e) Any payment of bonuses or accrued salaries out of the ordinary course of
business or agreements to materially increase the rate or terms of compensation
payable or to become payable by Acquiree to its directors, officers or key
employees; provided, however, that this subsection shall not restrict or limit
the Acquiree in any way from hiring additional personnel who are required for
its operations; or
(f) To the knowledge of Acquiree and Acquiree Shareholders, 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.
3.A.6 Litigation. To the knowledge of Acquiree and Acquiree
Shareholders, except as set forth in Schedule 3.A.6, there are no actions,
suits, claims, investigations or legal, administrative or arbitration
proceedings pending or threatened against the Acquiree, whether at law or in
equity, or before or by any federal, state, municipal, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality,
nor does the Acquiree or the Acquiree Shareholders know of any basis for any
such action, suit, claim, investigation or proceeding.
3.A.7 Compliance: Governmental Authorizations. The Acquiree has complied in all
material respects with all federal, state, local or foreign laws, ordinances,
regulations and orders applicable to its business, including without limitation,
federal and state securities, banking collection and consumer protection laws
and regulations that, if not complied with, would materially and adversely
affect its businesses. The Acquiree has all federal, state, local and foreign
governmental licenses and permits necessary for the conduct of its business.
Such licenses and permits are in full force and effect. Neither the Acquiree nor
the Acquiree Shareholders knows of any violations of any such licenses or
permits. To the knowledge of Acquiree and Xxxxx and Xxxxxx-Xxxxx, no proceedings
are pending or threatened to revoke or limit the use of such licenses or permits
that would have an adverse effect on the business of Acquiree.
3.A.8 Due Organization. The Acquiree is a corporation duly organized, validly
existing and in good standing under the laws of the state of Minnesota; it is
qualified to do business and in good standing in each state where its properties
are owned, leased or operated, or the business conducted by them require such
qualification except where failure to so qualify would not have a material
adverse effect on its financial condition, properties, business or results of
operations. The Acquiree has the power to own its properties and assets and to
carry on its business as now presently conducted. True and complete copies of
the Articles of Incorporation and Bylaws of Acquiree, including any amendments
thereto, have been attached as Schedule 3.A.8.
3.A.9 Taxes. Except as disclosed on Schedule 3.A.9, all (a)
federal, state, local or foreign tax returns (collectively, the "Returns")
required to be filed with respect to the properties, assets, operations, income
and net worth of Acquiree have been timely filed or appropriate extensions have
been obtained and such Returns are true, correct and complete; and (b) taxes and
governmental charges, including, without limitation, any interest and penalties
(collectively, "Taxes") due pursuant to such Returns have been paid or adequate
provision therefore has been made on the Financial statements. Except as
disclosed on Schedule 3.A.9, there are no outstanding agreements or waivers
extending the statutory period of limitation concerning any tax liability of
Acquiree, no examination of any Return of Acquiree is currently in progress and
no governmental authority has, within the last three (3) years, notified
Acquiree or Acquiree Shareholders of any tax claim, investigation or proceeding.
All monies required to be collected or withheld by the Acquiree for income
taxes, social security and other payroll taxes have been collected or withheld,
and either paid to the appropriate governmental agencies, set aside in accounts
for such purpose, or accrued, reserved against and entered upon the books of the
Acquiree and the Acquiree is not liable for any taxes or penalties for failure
to comply with any of the foregoing. The Acquiree is not and will not be liable
for any taxes imposed under Code Sections 1374 or 1375 and has been an S
Corporation for federal income tax purposes since its inception to the S
Termination Date. Acquiree will be responsible for filing the short period S
return ending on the S Termination Date, which return shall be reported on the
closing of the books method as set forth in Code Section 1362(e) (3) and the
Acquiree shall comply with any necessary requirements for making such election.
Set forth on Schedule 3.A.9 is a list of all elections which have a material
effect on the calculation of Taxes payable or with respect to the income,
deductions, credits, allowances or assets of the Acquiree. The Acquiree has not
made, is not obligated to make, and will not, as a result of the transactions
contemplated hereby, make or become obligated to make any "excess parachute
payment" within the meaning of Section 280G of the Code (determined without
regard to subsection (b) (4) thereof).
3.A.10 Agreements. Schedule 3.A.10 contains a true and complete
list of all material contracts, agreements, mortgages, obligations,
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 3.A.10 have been or will have been
made available to RCM prior to the date hereof. No event has occurred that
(whether with or without notice or lapse of time) would constitute a material
default by the Acquiree under any of the contracts or agreements set forth in
Schedule 3.A.10. Neither the Acquiree nor any of the Acquiree Shareholders have
knowledge of any material default by the other parties to such contracts or
agreements.
3.A.11 Title to Property and Related Matters. The Acquiree has, and at the time
of the Closing Date will have, good and marketable title to all of its
properties, interests in properties and assets, real, personal and mixed, owned
by it at the date of this Agreement or acquired by it after the date of this
Agreement, of any kind or character, free and clear of any liens or
encumbrances, except (i) those set forth in Schedule 3.A.11, and (ii) liens for
current taxes not yet delinquent. Schedule 3.A.11 also contains a general
description of all real property in which Acquiree has an ownership interest.
Except as set forth in said Schedule 3.A.11 and except for matters that may
arise in the ordinary course of business, the assets of the Acquiree are in good
operating condition and repair, reasonable wear and tear excepted. There does
not exist any condition that materially interferes with the use thereof in the
ordinary course of the business of the Acquiree.
3.A.12 Licenses; Trademarks; Trade Names. Except as set forth on Schedule
3.A.12, the Acquiree does not have, nor does it own or use in its business any
licenses, trademarks, trade names, service marks, copyrights, patents or any
applications for any of the foregoing that relate to its business.
3.A.13 Due Authorization. This Agreement has been duly
authorized, executed and delivered by the Acquiree and
constitutes a valid and binding agreement of the Acquiree,
enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors rights generally or by the application of equitable principles.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance with any of the provisions
hereof, will violate in any material respect any order, writ, injunction or
decree of any court or governmental authority, or violate or conflict with in
any material respect or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under), any provisions of the
Acquiree's Articles of Incorporation or Bylaws, the terms or conditions or
provisions of any note, bond, lease, mortgage, obligation, agreement,
arrangement or restriction of any kind to which the Acquiree is a party or by
which the Acquiree or its properties may be bound, or violate in any material
respect any statute, law, rule or regulation applicable to the Acquiree, except
that the consents disclosed on Schedule 3.A.13 will be required pursuant to the
terms of those scheduled agreements. No consent or approval by any governmental
authority is required in connection with the execution and delivery by the
Acquiree of this Agreement or the consummation of the transactions contemplated
hereby.
3.A.14 Capitalization. The authorized capitalization of the Acquiree consists of
500,000 shares of no par value Common Stock of which 1,000 shares are issued and
outstanding as of the date of this Agreement; the Acquiree Shares have been duly
authorized, validly issued, and are fully paid and non-assessable, and were
issued in compliance with applicable federal and state securities laws and
regulations. Except as set forth on Schedule 3.A.14, there are no outstanding or
presently authorized securities, warrants, preemptive rights, subscription
rights, options or related commitments or agreements of any nature to issue any
of the Acquiree's securities. Schedule 3.A.14 sets forth the share ownership and
respective percentage of the outstanding shares of Acquiree.
3.A.15 Brokerage Fees. Except for Lingate Financial Group,
whose fees shall be paid by RCM, the Acquiree has not incurred,
and will not incur, any liability for brokerage or finder's fees or similar
charges in connection with the transactions contained within this Agreement.
3.A.16 Share Ownership. The Acquiree Shares to be surrendered at the Closing by
Xxxxxx-Xxxxx and the Trust will be owned of record and beneficially by
Xxxxxx-Xxxxx and the Trust, free and clear of all liens and encumbrances of any
kind and nature. There are no agreements (other than this Agreement) to sell,
pledge, assign or otherwise transfer such securities.
3.A.17 Xxxxxx-Xxxxx and the Trust's Obligation. This Agreement constitutes the
valid and legally binding obligation of Xxxxxx-Xxxxx and the Trust. Except as
set forth on Schedule 3.A.17, neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
constitute in any material respect a violation of or default under, or conflict
in any material respect with, any judgment, decree, statute or regulation of any
governmental authority applicable to Xxxxxx-Xxxxx and the Trust or any contract,
commitment, agreement or restriction of any kind to which either of Xxxxxx-Xxxxx
and the Trust are a party or to the best of their knowledge by which either of
Xxxxxx-Xxxxx and the Trust are bound.
3.A.18 Approvals Required. Except as set forth on Schedule 3.A.18 or as
contemplated or as required by this Agreement, no approval, authorization,
consent, order or other action of, or filing with, any person, firm or
corporation or any court, administrative agency or other governmental authority
is required in connection with the execution and delivery by the Acquiree
Shareholders of this Agreement or the consummation by them of the transactions
described herein.
3.A.19 Employee; Benefit Plans.
(a) Schedule 3.A.19 sets forth the number and names of the employees of Acquiree
and the total 1996 compensation of each of the directors, officers and staff
employees of Acquiree. (b) Acquiree does not have any "employee benefit plans"
(as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")). Schedule 3.A.19 identifies all
programs, including, without limitation, any pension plans, health and welfare
plans, life, disability, medical, dental or hospitalization insurance plans,
sick-leave, vacation accrual or holiday plans, bonus, savings, profit-sharing or
other similar benefit plans, deferred compensation, stock option, stock
ownership and stock purchase plans covering employees or former employees of
Acquiree. Except as disclosed on Schedule 3.A.19, each such plan or program has
been operated substantially in accordance with its terms and, to the extent
applicable, ERISA and the Code. Acquiree does not sponsor or contribute to, nor
have they ever sponsored or been required to contribute to, any "multiemployer
plan" as such term is defined in Section 3(37) of ERISA.
(c) Except as disclosed on Schedule 3.A.19, Acquiree does not have any written
contracts, or oral contracts, including any employment, management, agency or
consulting contracts, with respect to any of its current or retired employees.
(d) Except as disclosed on Schedule 3.A.19, Acquiree is not a party to any
collective bargaining agreement and there are no union organizational activities
or efforts to effect a representation election pending or threatened.
(e) Except as disclosed on Schedule 3.A.19, 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.
3.A.20 Environmental Matters. Except as set forth in Schedule 3.A.20 Acquiree is
in compliance with all laws, rules and regulations relating to environmental
protection and conservation (including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act and the Superfund
Amendments and Reauthorization Act of 1986, as amended and all applicable state
laws pertaining to the environment), and neither
Acquiree or Acquiree Shareholders have received any notification of any asserted
present or past failure to so comply with such laws, rules or regulations.
Acquiree has obtained and is in compliance with all permits, licenses and other
authorizations required under federal, state and local laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
(collectively "Environmental Requirements"). Neither Acquiree or Acquiree
Shareholders is aware of, nor have Acquiree or Acquiree Shareholders received
notice of, any circumstances which may interfere with or prevent continued
compliance, or which may give rise to any liability, or otherwise form the basis
of any claim, or investigation under Environmental Requirements, relating to the
operation of Acquiree's business. For the purpose of this Section, "hazardous
substances" shall include (1) hazardous substances as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, and regulations thereunder and, (2) any substance for which state or
local laws require the clean-up, removal or other special handling of such
materials or imposing liability based upon improper handling thereof.
3.A.21 Insurance. Schedule 3.A.21 contains a list of all policies of liability,
environmental, crime, fidelity, life, fire, workers' compensation, health,
director and officer liability and all other forms of insurance currently in
effect and owned or held by Acquiree, and identifies for each such policy, to
the extent such information is reasonably available to Acquiree, the
underwriter, policy number, coverage type, premium, expiration date and
deductible. All of the insurance policies listed on Schedule 3.A.21 are
outstanding and in full force and effect and all premiums required to be paid
with respect to such policies are currently paid.
3.A.22 Bank Accounts. Schedule 3.A.22 contains a list of all
bank accounts maintained by, or for the benefit of, Acquiree.
3.A.23 Customers. Set forth on Schedule 3.A.23 is a list of the ten (10) largest
customers of Acquiree based on the dollar volume of income generated by that
customer for 1995. No such customer has terminated or, to Acquiree's knowledge,
is presently threatening to terminate its relationship with Acquiree.
3.A.24 Prepayment Penalties. There are no prepayment penalties or fines
associated with the outstanding long-term debt or lines of credit of Acquiree.
If any such prepayment penalties or fines occur, Xxxxxx-Xxxxx and the Trust
shall be liable for the payment of such penalties or fines.
3.A.25 Approval. The Board of Directors of the Acquiree have approved the
execution of this Agreement and the transactions contemplated thereby.
3.A.26 Establishment of Trust. The Trust is a duly established and validly
existing trust under the laws of the State of Minnesota, except the Principal
and Income Act of the state where the trust administrator is located (presently
Indiana) shall govern. True and complete copies of the Trust Agreement and any
amendments or supplements thereto have been attached as Schedule 3.A.26.
3.A.27 Trust's Power To Sell. The Trustee has the power to sell and convey the
Acquiree Shares and to receive the Purchase Consideration without in either case
the necessity of obtaining the approval of any court, judicial officer, trust
beneficiary or any other person, or the necessity on the part of RCM to see to
the application of the Purchase Consideration following receipt by the
Independent Special Trustee of the full consideration payable by RCM pursuant to
this Agreement.
3.A.28 Title To Trust Property. The Trust has good and
marketable title to its assets including the Acquiree Shares free
and clear of all liens and encumbrances of any nature.
3.A.29 Due Authorization. The Trustee has been duly and
properly appointed. The Trustee's execution of this Agreement
and his performance of the transactions contemplated hereby are within the
powers conferred on the Trustee by the Trust Agreement and/or by law.
3.A.30
Tax and Accounting Treatment of Acquiree. Acquiree's election to be treated as
an S corporation pursuant to the Code was terminated on November 4, 1996.
4.
REPRESENTATIONS AND WARRANTIES OF RCM. As a material inducement to the Acquiree
and the Acquiree Shareholders to enter into this Agreement and consummate the
transactions contemplated hereby, RCM does hereby make the following
representations and warranties to the Acquiree and the Acquiree Shareholders,
which representations and warranties are true and correct in all material
respects at this date, and will be true and correct in all material respects on
the Closing Date as though made on and as of such date.
4.1 Due Organization of RCM. RCM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, is
qualified to do business and is in good standing in each state where the
properties owned, leased or operated, or the business conducted, by it require
such qualification except where failure to so qualify would not have a material
adverse effect on the financial condition, properties, business or results of
operations of RCM. RCM has the corporate power and authority to own its property
and assets and to carry on its business as now presently conducted. True,
correct and complete copies of the Articles of Incorporation and By-Laws of RCM,
including any amendments thereto, are attached hereto as Schedule 4.1.
4.2 Compliance: Governmental Authorizations. To the best of its
knowledge, RCM has complied in all material respects with all
federal, state, local or foreign laws, ordinances, regulations
and orders applicable to its business, including without
limitation, federal and state securities, banking collection and
consumer protection laws and regulations that, if not complied
with, would materially and adversely affect its businesses. RCM
has all federal, state, local and foreign governmental licenses and permits
necessary for the conduct of its business. Such licenses and permits are in full
force and effect. RCM does not know of any violations of any such licenses or
permits. To the knowledge of RCM, no proceedings are pending or threatened to
revoke or limit the use of such licenses or permits that would have an adverse
effect on the business of RCM.
4.3 Due Authorization. This Agreement has been duly authorized, executed, and
delivered by RCM, and constitutes a legal, valid, and binding obligation of RCM,
enforceable in accordance with its terms except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors rights generally
or by the application of equitable principles. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance with any of the provisions hereof, will
violate in any material respect any order, writ, injunction or decree of any
court or governmental authority, or violate or conflict with in any material
respect or constitute a default under (or give rise to any right of termination,
cancellation or acceleration under), any provisions of RCM's Articles of
Incorporation or Bylaws, the terms or conditions or provisions of any note,
bond, lease, mortgage, obligation, agreement, arrangement or restriction of any
kind to which the Acquiree is a party or by which RCM or its properties may be
bound, or violate in any material respect any statute, law, rule or regulation
applicable to RCM, except that the consents disclosed on Schedule 4.3 will be
required pursuant to the terms of those scheduled agreements. No consent or
approval by any governmental authority is required in connection with the
execution and delivery by RCM of this Agreement or the consummation of the
transactions contemplated hereby.
4.4 Brokerage Fees. Except for Lingate Financial Group, whose fees shall be paid
by RCM, RCM has not incurred, and will not incur, any liability for brokerage or
finder's fees or similar charges in connection with the transactions contained
within this Agreement.
4.5 Approval. The Board of Directors of RCM have approved the execution of this
Agreement and the transactions contemplated thereby.
4.6 No Approvals Required. No approval, authorization, consent, order or other
action of, or filing with, any person, firm or corporation or any court,
administrative agency or other governmental authority is required in connection
with the execution and delivery by RCM of this Agreement or the consummation by
it of the transactions described herein, except to the extent that the parties
may be required to file reports in accordance with relevant regulations under
federal and state securities laws.
5.
COVENANTS OF THE PARTIES.
Any reference in this Section 5 to RCM shall be deemed a reference to RCM and
each of its subsidiaries.
5.1 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 10,
each of the parties hereto shall provide to the other parties (and the other
parties' authorized representatives) full access during normal business hours to
the premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.2 Confidentiality.
(a)Confidentiality of RCM-Related Information. With respect to information
concerning RCM that is made available to Acquiree or Acquiree Shareholders
pursuant to the provisions of Section 5.1, Acquiree and Acquiree Shareholders
agree that they shall hold
such information in strict confidence, shall not use such information except for
the sole purpose of evaluating the transactions contemplated by this Agreement
and shall not disseminate or disclose any of such information other than to
representatives who need to know such information for the sole purpose of
evaluating the transactions to be undertaken pursuant to this Agreement (each of
whom shall be informed in writing by Acquiree of the confidential nature of such
information and directed by Acquiree to treat such information confidentially).
If this Agreement is terminated pursuant to the provisions of Section 10,
Acquiree and Acquiree Shareholders shall immediately return all such
information, all copies thereof and all information prepared by Acquiree based
upon the same, upon RCM's request; provided, however, that one copy of all such
material may be retained by Acquiree's outside legal counsel for purposes only
of resolving any disputes under this Agreement. The above limitations on use,
dissemination and disclosure shall not apply to information that; (i) is learned
by Acquiree or Acquiree Shareholders from a third party entitled to disclose it;
(ii) become known publicly other than through Acquiree or Acquiree Shareholders
or any party who received the same through Acquiree or Acquiree Shareholders;
(iii) is required by law or court order to be disclosed by Acquiree or Acquiree
Shareholders (after notice and opportunity to oppose such disclosure); or (iv)
is disclosed with the express prior written consent thereto of RCM. Acquiree or
Acquiree Shareholders shall undertake all necessary steps to ensure that the
secrecy and confidentiality of such information will be maintained in accordance
with the provisions of this subparagraph (a);
(b) Confidentiality of Acquiree-Related Information. With respect to information
concerning Acquiree that is made available to RCM pursuant to the provisions of
Section 5.2, RCM agrees that it shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the transactions to be undertaken pursuant to this Agreement and
shall not disseminate or disclose any of such information other than to their
directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the
transactions to be undertaken pursuant to this Agreement (each of whom shall be
informed in writing by RCM of the confidential nature of such information and
directed by such party to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Section 10, RCM agrees to
return immediately all such information, all copies thereof and all information
prepared by it based upon the same, upon Acquiree's request; provided, however,
that one copy of all such material may be retained by RCM's outside legal
counsel for purposes only of resolving any disputes under this Agreement. The
above limitations on use, dissemination and disclosure shall not apply to
information that: (i) is learned by RCM from a third party entitled to disclose
it; (ii) becomes known publicly other than through RCM or any party who received
the same through either of them; (iii) is required by law or court order to be
disclosed by RCM (after notice and opportunity to oppose such disclosure); or
(iv) is disclosed with the express prior written consent thereto of Acquiree.
RCM agrees to undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this subparagraph (b).
5.3
(Reserved)
5.4 Nondisclosure. Neither RCM, Acquiree or Acquiree Shareholders shall disclose
to the public or to any third party the existence of this Agreement or the
transactions contemplated hereby or any other material non-public information
concerning or relating to the other party hereto, other than with the express
prior written consent of the other party hereto, except as may be required by
applicable securities laws as they pertain to public companies, law or court
order or to enforce the rights of such disclosing party under this Agreement, in
which event the contents of any proposed disclosure shall be discussed with the
other party before release; provided, however, that notwithstanding anything to
the contrary contained in this Agreement, any party hereto may disclose this
Agreement to any of its directors, officers, employees, shareholders,
affiliates, agents and representative who need to know such information for
the sole purpose of evaluating the transactions contemplated by this Agreement,
to any party whose consent is required in connection with this Agreement; or to
any regulatory body where such disclosure is required under federal or state
law.
5.5
Restrictive Covenant. For the purpose of this Section 5.5, "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 in the United States including Alaska and
Hawaii: (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 RCM's Business; (ii) without the
express written consent of RCM, 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 RCM'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 customer of RCM for the purpose
of competitively soliciting business in competition with RCM's Business.
Acquiree Shareholders further agree that during the Restrictive Period no
Acquiree Shareholder will directly or indirectly induct employees of RCM to
either accept employment from, or to engage in activities with, a business that
is in competition with RCM.
5.6
Remedies. Acknowledging that a breach of any provision of
Sections 5.4 and 5.5 may cause substantial injury to RCM 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 of the breach of any of the
provisions of Sections 5.4 or 5.5 hereof, RCM shall have, in
addition to all other remedies (including but not limited to
recovery of damages and all costs and reasonable fees incurred by
RCM) 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 RCM has an adequate remedy
at law for such breach of Sections 5.4 or 5.5 and covenant and agree that
Acquiree Shareholders will not assert such claim or defense in any action or
proceeding to enforce these provisions. The parties agree and acknowledge that
they are familiar with the present and proposed operations of RCM and believe
that the restrictive covenant set forth in Section 5.5 is reasonable with
respect to this subject matter, duration and geographical application.
5.7 Consents. RCM and Acquiree shall cooperate and use their best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts as are necessary for the consummation of the transactions
contemplated by this Agreement.
5.8 Filings. RCM and Acquiree shall, as promptly as practicable, make any
required filings, and RCM and Acquiree shall promptly make any other required
submissions, under any law, statute, order rule or regulation with respect to
the transactions contemplated by this Agreement and the related transactions and
shall cooperate with each other with respect to the foregoing.
5.9 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 reasonably practicable, to consummate the transactions
contemplated by this Agreement.
5.10 Notification of Certain Matters. Except with respect to the actions
contemplated by this Agreement, Acquiree shall give prompt notice to RCM, and
RCM shall give prompt notice to Acquiree, of (a) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which would
cause any of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (b) any
material failure of Acquiree, on the one hand, or RCM, on the other hand, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however, the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available to the party receiving such notice under this
Agreement.
5.11 Consent of Auditors. Acquiree Shareholders shall, when necessary, obtain
the necessary consents of all auditors who have provided audit reports in
connection with any of the Financial statements which may be required by RCM for
the preparation and filing of documents and reports with the SEC.
5.12 Discharge of Bonuses. Any and all accrued bonuses or other compensation
over and above historic compensation levels which may be due and owing to the
Acquiree Shareholders shall be discharged and Acquiree released from such
obligations on or before the Closing Date.
5.13 Loss of "S" Corporation status. Upon completion of the
transactions as contemplated by this Agreement, Acquiree
Shareholders shall be responsible for the payment and filing of any final tax
returns or other obligations incurred in connection with the period of time
during which Acquiree was an S Corporation.
5.14 Enforcement of Dividend Distribution. RCM will cause
Acquiree to keep in force and not rescind the Directors Writing dated November
3, 1996 attached as Exhibit F and /or the Collection Agreement of the same date
attached as Exhibit G and shall cause Acquiree to timely make the distributions
and payments directed therein. RCM shall be liable for and pay the shareholders
of record on November 3, 1996, within five (5) days of the due date, the amount
of any such distributions and/or payments authorized by such Directors Writing
and/or Collection Agreement and not timely made.
5.15 Stock Options. Upon completion of the transaction as contemplated herein
RCM agrees to award options to acquire 10,000 shares in the aggregate of its
$.05 par value common stock to those persons listed in Schedule 5.15 hereof.
Said awards shall be made following the Closing Date but no later than March 15,
1997. Such options shall be awarded pursuant to the RCM 1996 Executive Stock
Option Plan.
(a) Any person listed on Schedule 5.15 who has not been continuously employed by
Acquiree for the entire period from the Closing Date to the date of the award
shall forfeit his or her right to be awarded options and such awards shall be
assigned to Xxxxxx-Xxxxx.
(b)
RCM will reserve out of its authorized but unissued shares sufficient stock to
fulfill the requirements of the Plan. No award of options to others shall be
made by RCM pursuant to the 1996 Executive Stock Option Plan if the result of
such awards is to leave insufficient shares available to be awarded pursuant to
Section 5.15 hereof. No options shall be awarded and no stock issue pursuant to
any option in violation of any law, ordinance or regulation. 5.16 Documents at
Closing. Each party to this Agreement agrees to execute and deliver on the
Closing Date those documents
identified in Section 6.2.
5.17 Expenses. Each of RCM and the Acquiree Shareholders shall bear their own
expenses in connection with the transactions contemplated by this Agreement.
5.18 Interim Operations of Acquiree. Except as contemplated by this Agreement,
including any Exhibitsand Schedules hereto, or to the extent that the parties
shall otherwise consent in writing or as otherwise identified in Schedule 3.A.5,
during the period from the date of this Agreement and continuing until the
Closing Date, Acquiree shall carry on its respective businesses in the usual,
regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts to preserve intact its
present organization of such business, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it and it shall not take any
action, or fail to take any action, that is reasonably likely to result in any
of its representations and warranties set forth in this Agreement becoming
untrue as though such representations and warranties are made as of and on the
Closing Date.
5.19 Taxes Prior To Conversion to Accrual Basis. Any taxes attributable to the
activities of Acquiree on or prior to November 3, 1996 are the sole obligation
of the Acquiree Shareholders who agree to pay the same on or prior to their due
date. If, as a result of Acquiree Shareholders failure to pay the same, such
taxes are asserted against RCM or its subsidiaries then such taxes shall
constitute a Claim as that term is defined in Section 9.1 hereof for which RCM
or its subsidiaries may invoke all its remedies pursuant to Section 9 hereof.
5.20 Prohibition on Trading in RCM Stock. The Acquiree and Acquiree Shareholders
acknowledge that the United States Securities Laws prohibit any person who has
received material non- public information concerning the matters which are the
subject matter of this Agreement from purchasing or selling the securities of
RCM, or from communicating such information to any person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell securities of RCM. Accordingly, the Acquiree Shareholders agree that they
will not purchase or sell any securities of RCM, or communicate such material
non-public information to any other person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of RCM, until no earlier than 72 hours following the dissemination of a Current
Report on Form 8-K to the SEC announcing the Closing pursuant to this Agreement.
5.21 No Change in Acquiree.
So long as any sums are due Acquiree Shareholders pursuant to
this Agreement or the Notes, RCM agrees that it will continue the separate
corporate existence of Acquiree and will not merge, consolidate, liquidate, or
dissolve Acquiree, nor will it sell or liquidate its assets except in the
ordinary course of business and will not grant any stock options, warrants or
subscriptions with respect to the stock of Acquiree, nor will it increase or
decrease its authorized or outstanding capital stock and will declare no
dividends or other distribution with respect thereto payable in the stock of
Acquiree.
5.22Change in Accounting Method. RCM will cause to be timely
filed IRS Form 3115 to change Acquiree's method of accounting from cash to
accrual.
6.
THE CLOSING.
6.1 The Closing. The closing ("Closing") of the purchase and sale and other
transactions contemplated by this Agreement shall take place (a) at 9:00 a.m. on
January 7, 1997, at the offices of Acquiree at 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx
000, Xxxxx, Xxxxxxxxx, or, (b) at such other time and place and on such other
date as RCM and Acquiree or Acquiree Shareholders shall agree. The date of the
Closing is referred to herein as the "Closing Date."
(a)
Notwithstanding the actual date of the Closing the purchase and sale and other
transactions contemplated by this Agreement shall be deemed to have occurred on
the Effective Closing Date.
6.2 Transactions at Closing. On the Closing Date, the following transactions
shall occur, all of such transactions being deemed to occur simultaneously:
(a) the Acquiree and Acquiree Shareholders will deliver, or cause to be
delivered, to RCM or the Escrow Agent as the case may be, the following:
(i) stock certificates representing the Acquiree Shares being surrendered
hereunder, duly endorsed with stock powers attached
in blank;
(ii) all corporate records of the Acquiree, including without limitation
corporate minute books (which shall contain copies of the Articles of
Incorporation and Bylaws, as amended to the Closing Date), stock books, stock
transfer books, corporate seals; and such other corporate books and records as
may reasonably be requested by RCM and its counsel;
(iii) a certificate executed by the Acquiree and the Acquiree Shareholders to
the effect that all representations and warranties made by the Acquiree and
Acquiree Shareholders under this Agreement are true and correct as of the
Closing Date, as though originally given to RCM on said date;
(iv) a certificate of good standing for the Acquiree from the secretary of the
state of Minnesota, dated at or about the Closing Date, to the effect that such
corporation is in good standing under the laws of such state;
(v) an incumbency certificate for the Acquiree signed by all of
the officers thereof dated at or about the Closing Date;
(vi) certified Articles of Incorporation of the Acquiree dated at or about the
Closing Date and a copy of the Bylaws of the Acquiree certified by the Secretary
of the Acquiree dated at or about the Closing Date;
(vii) certified resolutions from the Secretary of the Acquiree dated at or about
the Closing Date authorizing the transactions contemplated under this Agreement;
(viii) an Employment Agreement described in Exhibit "E" signed by
Xxxxx Xxxxx and RCM;
(ix) resignations of all officers and directors of Acquiree, following which
Xxxx Xxxxx shall be elected by RCM as the sole director of Acquiree;
(x) any documentation associated with the transactions
contemplated by Section 3.A.30 of this Agreement;
(xi) such documents as may be needed to accomplish the Closing
under the corporate laws of the states of incorporation of RCM
and Acquiree;
(xii) such other instruments, documents and certificates, if any, as are
required to be delivered pursuant to the provisions of this Agreement or that
may be reasonably requested in furtherance of the provisions of this Agreement;
(xiii) an opinion of counsel to Acquiree and Acquiree
Shareholders in form and substance satisfactory to RCM;
(xiv) an opinion of counsel to the Trust in form and substance
satisfactory to RCM.
(b)
RCM will deliver or cause to be delivered to the Acquiree and the Acquiree
Shareholders:
(i) the cash portion of the Purchase Consideration by wire
transfer;
(ii) The Escrow Agreements in the form attached as Exhibits "C"
and "D";
(iii) The Notes in the form attached as Exhibits "A" and "B";
(iv) a certificate of RCM's President to effect that all representations and
warranties of RCM under this Agreement are reaffirmed on the Closing Date, as
though originally given to the Acquiree and the Acquiree Shareholders on said
date;
(v) certificate from the Secretary of State of Nevada dated at or about the
Closing Date that RCM is in good standing under the laws of said state;
(vi) certified resolution of the Secretary of RCM dated at or about the Closing
Date authorizing the transactions contemplated under this Agreement;
(vii) an opinion of counsel in form and substance satisfactory to
the Acquiree and the Acquiree Shareholders;
(viii) an Employment Agreement described in Exhibit "E" signed by
Xxxxx Xxxxx and RCM;
(ix) such documents as may be needed to accomplish the Closing
under the corporate laws of the state of incorporation of RCM and
Acquiree;
(x) 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.
7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND ACQUIREE SHAREHOLDERS. All
obligations of the Acquiree and the Acquiree Shareholders under this Agreement
are subject to the fulfillment, prior to or on the Closing Date (unless
otherwise stated herein), of each of the following conditions, any one or all of
which may be waived by the Acquiree or the Acquiree Shareholders:
7.1 The Board of Directors of RCM shall have approved the execution of this
Agreement and the transactions contemplated thereby.
7.2 The representations and warranties made by or on behalf of RCM contained in
this Agreement or in any certificate or document delivered to the Acquiree or
the Acquiree Shareholders pursuant to the provisions hereof at the Closing Date
shall be true in all respects at and as of the time of the Closing Date as
though such representations and warranties were made at and as of such time.
7.3 RCM 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 it prior to or at the Closing.
7.4 RCM shall have delivered all of the Schedules required
herein, and copies of the documents referred to therein, to the
Acquiree and such Schedules and documents shall have been reasonably acceptable
to Acquiree and Acquiree Shareholders.
7.5 There shall be delivered to the Acquiree and the Acquiree Shareholders an
officer's certificate of RCM to the effect that all of the representations and
warranties of RCM set forth herein are true and complete in all material
respects as of the Closing Date, and that RCM has complied in all material
respects with its covenants and agreements set forth herein that are required to
be complied with by the Closing Date.
7.6 No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the Closing and the other transactions
contemplated by this Agreement.
7.7 RCM shall have executed an Employment Agreement with Xxxxx Xxxxx
substantially in form and substance similar to that attached hereto as Exhibit
"A".
7.8 Acquiree Shareholders shall have completed prior to the Closing Date, to
their satisfaction, a due diligence review of the financial condition, results
of operations, properties, assets, liabilities, business or prospects of RCM.
7.9 All director, shareholder, lender, lessor and other parties' consents and
approvals, as well as all filings with, and all necessary consents or approvals
of, all federal, state and local governmental authorities and agencies, as are
required of RCM under this Agreement, applicable law or any applicable contract
or agreement (all as contemplated by this Agreement) to complete the Closing
shall have been secured.
7.10 There shall have occurred no material adverse change to the business,
operations, assets, management, regulatory environment and business prospects of
RCM.
8.
CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM. All obligations of RCM under this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions, any one or all of which may be waived in
writing by RCM:
8.1 The Board of Directors of the Acquiree have approved the execution of this
Agreement and the transactions contemplated thereby.
8.2 The representations and warranties made by the Acquiree and the Acquiree
Shareholders contained in this Agreement or in any certificate or document
delivered to RCM at the Closing pursuant to the provisions hereof shall be true
in all respects at and as of the time of the Closing as though such
representations and warranties were made at and as of such time.
8.3 The Acquiree and the Acquiree Shareholders shall have performed and complied
in all material respects with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by them prior to or at the
Closing.
8.4 The Acquiree shall have delivered all of the Schedules required herein, and
copies of the documents referred to therein, to RCM and such Schedules and
documents shall have been reasonably acceptable to RCM.
8.5 There shall be delivered to RCM an officer's certificate of the Acquiree to
the effect that all of the representations and warranties of the Acquiree set
forth herein are true and complete in all material respects as of the Closing
Date, and that the Acquiree has complied in all material respects with its
covenants and agreements set forth herein that are required to be complied with
by the Closing Date; and there shall be delivered to RCM certificates signed by
Xxxxxx-Xxxxx and the Trust to the effect that the representations and warranties
of Xxxxxx-Xxxxx and the Trust made within this Agreement are true and correct in
all material respects.
8.6 RCM shall have completed prior to the Closing Date, to its satisfaction, a
due diligence review of the financial condition, results of operations,
properties, assets, liabilities, business or prospects of the Acquiree.
8.7 RCM shall have obtained the approval of its principal lender of this
Agreement and the transactions contemplated thereby.
8.8 Acquiree shall not have any "built-in gains" from the termination of its
"S"-Corporation status.
8.9 All director, shareholder, lender, lessor and other parties' consents and
approvals, as well as all filings with, and all necessary consents or approvals
of, all federal, state and local governmental authorities and agencies, as are
required of Acquiree or Acquiree Shareholders under this Agreement, applicable
law or any applicable contract or agreement (all as contemplated by this
Agreement) to complete the Closing shall have been secured.
8.10 No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the Closing and the other transactions
contemplated by this Agreement.
8.11 Acquiree and Acquiree Shareholders shall take all actions necessary to
effect the resignation of all of the current directors and officers of Acquiree
in the manner identified in Section 6.2(a)(ix).
8.12 Except as contemplated or as required by this Agreement, there shall have
occurred no material adverse change to the business, operations, assets,
management, regulatory environment and business prospects of Acquiree.
9.
INDEMNIFICATION.
9.1 Xxxxxx-Xxxxx and the Trust. Xxxxxx-Xxxxx and the Trust (but as to the Trust,
only as to Sections 3.A.1, 3.A.6, 3.A.16, 3.A.17, 3.A.18, 3.A.26, 3.A.27, 3.A.28
and 3.A.29) jointly and severally shall indemnify, defend and hold harmless, RCM
and its subsidiaries from and against any and all demands, claims, actions or
causes of action, judgments, assessments, losses, liabilities, damages or
penalties and reasonable attorneys' fees and related disbursements
(collectively, "Claims") incurred by RCM or its subsidiaries which arise out of
or result from a misrepresentation, breach of warranty, or breach of any
covenant of Acquiree or Acquiree Shareholders contained herein or in the
Schedules annexed hereto or in any other documents or instruments furnished by
the Acquiree or Acquiree Shareholders pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
9.2 RCM. RCM shall indemnify, defend and hold harmless Acquiree and Acquiree
Shareholders from and against any and all Claims incurred by the Acquiree and/or
any Acquiree Shareholders which arise out of or result from a misrepresentation,
breach of warranty or breach of any covenant of RCM contained herein or in any
ancillary certificates or other documents or instruments furnished by RCM
pursuant hereto or in connection with the transactions contemplated hereby or
thereby.
9.3 Methods of Asserting Claims for Indemnification. All claims
for indemnification under this Agreement shall be asserted as
follows:
(a) Third Party Claims. In the event that any Claim for which a party (the
"Indemnitee") would be entitled to indemnification under this Agreement is
asserted against or sought to be collected from the Indemnitee by a third party
the Indemnitee shall promptly notify the other party (the "Indemnitor") of such
Claim, specifying the nature thereof, the applicable provision in this Agreement
or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have 30 days (or to a date not less than 10 days prior to when
a responsive pleading or other document is required to be filed but in no event
less than 10 days from delivery or mailing of the Claim Notice) (the "Notice
Period") to notify the Indemnitee (i) whether or not it disputes the Claim and
(ii) if liability hereunder is not disputed, whether or not it desires to defend
the Indemnitee. If the Indemnitor elects to defend by appropriate proceedings,
such proceedings shall be promptly settled or prosecuted to a final conclusion
in such a manner as to avoid any risk of damage to the Indemnitee; and all costs
and expenses of such proceedings and the amount of any judgment shall be paid by
the Indemnitor.
If the Indemnitee desires to participate in, but not control, any such defense
or settlement, it may do so at its sole cost and expense. If the Indemnitor has
disputed the Claim, as provided above, and shall not defend such Claim, the
Indemnitee shall have the right to control the defense or settlement of such
Claim, in its sole discretion, and shall be reimbursed by the Indemnitor for its
reasonable costs and expenses of such defense if it shall thereafter be found
that such Claim was subject to indemnification by the Indemnitor hereunder.
(b) Non-Third Party Claims. In the event that the Indemnitee should have a Claim
for indemnification hereunder which does not involve a Claim being asserted
against it or sought to be collected by a third party, the Indemnitee shall
promptly send (degree) a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice
Period that it disputes such Claim, the Indemnitor shall pay the amount thereof
to the Indemnitee. If the Indemnitor disputes the amount of such Claim, and
settlement among the parties cannot be reached within 45 days (or such shorter
period as may be necessary to prevent the running of any applicable statute of
limitations), suit may be instituted by the aggrieved party in any court of
competent jurisdiction.
(c) Cooperation of Parties. If either party chooses to defend
or participate in the defense of any liability, it shall have the
right to receive from the other party, subject to any restriction of applicable
law or that may be necessary to preserve the privilege of attorney-client
communications, any books, records or other documents within such other party's
control that are necessary or appropriate for such defense.
(d)
Right of Set Off. The amount of any Claims as to which it is finally determined
by a non-appealable order or judgment of a court of competent jurisdiction or by
agreement of the parties that RCM is entitled to indemnification hereunder may
be set off by RCM first against funds accrued to fund the Earn-Out and, to the
extent the amount of such accrual is insufficient to cover such finally
determined Claims, then against amounts remaining payable pursuant to the Notes,
provided that if the amount of such finally determined Claims are less than the
amounts remaining payable pursuant to the Notes and the Earn-Out then RCM's
right of set off shall be limited to the aggregate amount of the finally
determined Claims and any excess shall be payable to the Acquiree Shareholders,
but if the remaining balance of the Notes or any funds accrued to fund the Earn
Out is less than the amount of the finally determined Claims the Acquiree
Shareholders shall remain liable for any such deficiency.
10.
TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at
any time prior to the Closing Date:
(a) by mutual written consent of RCM and Acquiree;
(b) by any of RCM and Acquiree:
(i) if the Closing shall not have occurred by the Closing Date unless such date
is extended by the mutual written agreement of RCM and Acquiree, and in such
event, only until the date the Closing Date has been so extended; provided,
however, that the right to terminate this Agreement under this Section 10(b)(i)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of,or resulted
in, the failure of the Closing Date to occur on or before that
date; or
(ii) if any court of competent jurisdiction, or any governmental body,
regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or filing or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) If any party hereto shall materially breach any of the Representations And
Warranties contained in Sections 3 or 4, or shall default in the observance or
in the due and timely performance of any of the Covenants of the parties
contained in Section 5 of this Agreement, the non- defaulting party may, upon
written notice, terminate this Agreement and in that event, the defaulting party
shall indemnify, hold harmless and assume full and complete responsibility for
any and all expenses of the non-defaulting party incurred in this transaction,
without prejudice to its or their rights and remedies available under law,
including the right to recover expenses, costs and other damages.
Notwithstanding the foregoing, the non- defaulting party may elect to waive such
breach by the defaulting party and proceed with the Closing, thereby waiving any
right to damages as a result of such breach.
11.
NOTICES. All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person or sent by overnight delivery, confirmed telecopy or prepaid first class
registered or certified mail, return receipt requested, to the following
addresses, or such other addresses as are given to the other parties to this
Agreement in the manner set forth herein:
11.1 If to RCM, to:
Xx. Xxxx Xxxxx
Chief Executive Officer
RCM Technologies, Inc.
0000 XxXxxxxxx Xxxxxx, xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
with a courtesy copy to:
Xxxxxx X. Xxxxxx, Esquire
Xxxxxxx & Bach, P.C.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
11.2 If to the Acquiree Shareholders, to:
Xxxxxx Xxx Xxxxxx-Xxxxx
00000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
The Xxxxx Xxxxx and Xxxx Xxxxxx-Xxxxx Trust
c/o Xxxxx Xxxxxxxx, Esquire
Independent Special Trustee
Xxxxxxxx 0, Xxxxx 000
0000 Xxxxxx Xxxxx
Xx. Xxxxx Xxxx, XX 00000
11.3 If to the Acquiree, to:
Programming Alternatives of Minnesota, Inc.
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a courtesy copy to:
Xxxxx Xxxxxxxx, Esquire
Xxxxxxxx 0, Xxxxx 000
0000 Xxxxxx Xxxxx
Xx. Xxxxx Xxxx, XX 00000.
Any such notices shall be effective when delivered in person or sent by
telecopy, one business day after being sent by overnight delivery or three
business days after being sent by registered or certified mail. Any of the
foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of address shall be effective
only upon receipt.
12.
LIMITATION ON TRUSTEE LIABILITY.
Notwithstanding anything contained herein, the liability of any Trustee or
Independent Special Trustee serving from time to time pursuant to the Trust
shall be enforceable only out of the assets of the Trust and there shall be no
recourse in the enforcement of any liability hereunder against any then serving
or former Trustee or Independent Special Trustee.
13.
MISCELLANEOUS.
13.1 Further Assurances. At any time, and from time to time, after the Closing
Date, each party will execute such additional instruments and take such further
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
13.2 Nature of Representations and Warranties. All of the parties hereto are
executing and carrying out the provisions of this Agreement in reliance on the
representations, warranties, covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for, and any
investigation that they might have made or any other representations,
warranties, covenants, agreements, promises or information, written or oral,
made by the other party or parties or any other person shall not be deemed a
waiver of any breach of any such representation, warranty, covenant or
agreement.
13.3 Survival of Representations. All covenants, agreements, representations and
warranties made herein shall survive the Closing Date. 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 permitted assigns of all parties hereto.
13.4 Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof. It supersedes all
prior negotiations, letters and understandings relating to the subject matter
hereof.
13.5 Amendment. This Agreement may not be amended, supplemented or modified in
whole or in part- except by an instrument in writing signed by the party or
parties against whom enforcement of any such amendment, supplement or
modification is sought.
13.6 Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other
parties.
13.7 Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this agreement.
13.8 Number and Gender. Words used in this Agreement, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
13.9 Construction. The parties hereto and their respective legal counsel
participated in the preparation of this Agreement; therefore, this Agreement
shall be construed neither against nor in favor of any of the parties hereto,
but rather in accordance with the fair meaning thereof.
13.10 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.
13.11 Severability. The invalidity, illegality or unenforceability of any
provision or provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforceability of a portion of any provision of this
Agreement affect the balance of such provision. In the event that any one or
more of the provisions contained in this Agreement or any portion thereof shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained herein.
13.12 Binding Nature. This Agreement shall be governed by the
laws of the State of Minnesota and will be binding upon and will
inure to the benefit of any successor or successors of the
parties hereto.
13.13 No Third-Party Beneficiaries. No person shall be deemed to possess any
third-party beneficiary right pursuant to this Agreement. It is the intent of
the parties hereto that no direct benefit to any third party is intended or
implied by the execution of this Agreement.
13.14 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original and all of which together will
constitute one and the same instrument.
13.15 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.
IN WITNESS THEREOF, the parties have executed this Agreement as of the date
first above written.
RCM TECHNOLOGIES, INC.
By:
Name: XXXX XXXXX
Title: President
PROGRAMMING ALTERNATIVES OF
MINNESOTA, INC.
By:
Name:
Title:
XXXXXX XXX XXXXXX-XXXXX
THE XXXXX XXXXX AND XXXX
XXXXXX-XXXXX TRUST
XXXXX XXXXXXXX,
Independent Special Trustee
[NSB\04257PAM.AGR]
SCHEDULE 2.4
[List of Employees eligible to
receive Earn Out payments]
SCHEDULE 3.A.2(a)
[1993, 1994 and 1995 Financial Statements]
SCHEDULE 3.A.3
[Undisclosed Liabilities of Acquiree]
SCHEDULE 3.A.4
[Accounts Receivable of Acquiree]
SCHEDULE 3.A.5
[Material adverse changes]
SCHEDULE 3.A.6
[Litigation]
SCHEDULE 3.A.8
[Articles of Incorporation,
Bylaws and Contracts of Acquiree]
SCHEDULE 3.A.9
[Tax information]
SCHEDULE 3.A.10
[All material Contracts and Agreements of Acquiree]
SCHEDULE 3.A.11
[Liens, encumbrances and general
description of all real property in
which Acquiree has an ownership interest]
SCHEDULE 3.A.12
[Licenses, trademarks and trade names of Acquiree]
SCHEDULE 3.A.13
[Consents to be obtained by Acquiree]
SCHEDULE 3.A.14
[Capitalization of Acquiree]
SCHEDULE 3.A.17
[Xxxxxx-Xxxxx and the Trust's Obligation]
SCHEDULE 3.A.18
[Approvals required to be obtained
By Acquiree Shareholders]
SCHEDULE 3.A.19
[Number and names of employees and
compensation of all directors and
officers of Acquiree - identifies
all employee benefit plans]
SCHEDULE 3.A.20
[Compliance with environmental and conservation laws]
SCHEDULE 3.A.21
[List of all insurance policies of Acquiree]
SCHEDULE 3.A.22
[List of all bank accounts maintained
or for the benefit of Acquiree]
SCHEDULE 3.A.23
[List of 10 largest customers of Acquiree, based on dollar volume of income
for Fiscal 1995]
SCHEDULE 4.1
[Articles of Incorporation and Bylaws of RCM]
SCHEDULE 4.3
[Consents to be obtained by RCM]
SCHEDULE 5.15
[List of employees eligible for aware of stock options]
