STOCK PURCHASE AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
GLOBAL TECHNOLOGY SOLUTIONS INC.
AND
THE SHAREHOLDER OF
GLOBAL TECHNOLOGY SOLUTIONS INC.
TABLE OF CONTENTS
Page
1. DEFINITIONS.................................................. 1
2. PURCHASE AND SALE OF SHARES OF ACQUIREE...................... 3
3. REPRESENTATIONS AND WARRANTIES OF ACQUIREE
AND OTHERS................................................... 5
4. REPRESENTATIONS AND WARRANTIES OF RCM........................13
5. COVENANTS OF THE PARTIES.....................................15
6. THE CLOSING..................................................21
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE
AND ACQUIREE SHAREHOLDER.....................................23
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM...................24
9. INDEMNIFICATION..............................................26
10. ARBITRATION..................................................28
11. TERMINATION..................................................28
12. NOTICES.................................................. ...29
13. MISCELLANEOUS............................................. ..30
LIST OF SCHEDULES
2.4 List of persons eligible to receive Additional Purchase
Consideration
3.2(a) Financial Statements for the fiscal years ended December 31,
1997, December 31, 1996 and December 31, 1995
3.2(b) Interim Financial Statements for the period January 1,
1998 through February 28, 1998
3.3 Undisclosed Liabilities of Acquiree
3.4 Accounts Receivable of Acquiree as of __________________
3.5 Material adverse changes
3.5(e) Extraordinary bonuses or salaries
3.6 Litigation
3.8 Articles of Incorporation, Bylaws and Amendments thereto
of Acquiree
3.9 Tax information
3.10 All material Contracts and Agreements of Acquiree
3.11 Liens, encumbrances and general description of all real
property in which Acquiree has an ownership interest
3.12 Licenses, trademarks and trade names of Acquiree
3.13 Consents to be obtained by Acquiree
3.14 Capitalization of Acquiree
3.17 Parandhaman's Obligation
3.18 Approvals required to be obtained by Acquiree Shareholder
3.19 Number and names of employees and compensation of all
directors and officers of Acquiree - identifies all
employee benefit plans
3.20 Compliance with environmental and conservation laws
3.21 List of all insurance policies of Acquiree
3.22 List of all bank accounts maintained or for the benefit
of Acquiree
3.23 List of 10 largest customers of Acquiree, based on dollar
volume of income for the twelve month period ended
December 31, 1997
3.30 Agreements to be terminated
4.1 Articles of Incorporation and Bylaws of RCM
4.3 Consents to be obtained by RCM
5.10 Bonuses and Fees
LIST OF EXHIBITS
Exhibit "A" Employment Agreement with _________________
Exhibit "B" Employment Agreement with ____________________
Exhibit "C" Opinion of counsel for Global Technology Solutions
Inc.
Exhibit "D" Opinion of counsel for RCM Technologies, Inc.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of this day of , 1998, by and among RCM TECHNOLOGIES, INC., a Nevada
corporation ("RCM"); GLOBAL TECHNOLOGY SOLUTIONS INC, a California corporation,
doing business as GLOBAL SOLUTIONS (the "Acquiree"); and XXXXX XXXXXXXXXXX (the
"Acquiree Shareholder").
RECITALS:
WHEREAS, the Acquiree Shareholder owns in the aggregate one hundred
percent (100%) of the issued and outstanding common stock of the Acquiree (the
"Acquiree Shares"); and
WHEREAS, the Acquiree Shareholder desires 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:
Accounts Receivable. . all of Acquiree's accounts
At Closing receivable as of the Closing Date
not outstanding for more than sixty
(60) days
Acquiree . . . . . . . Global Technology Solutions Inc. a
California corporation.
Cash Balance . . . . . Acquiree's actual cash balance at
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At Closing the Closing Date
minus all bank debt and all
outstanding checks.
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.
Net Working Capital. . Unaudited balance sheet of the
Balance Sheet Acquiree as of March 31, 1998
prepared in accordance with
the requirements of GAAP
containing all accruals
including but not limited
to all payroll accruals
(bonuses, commissions,
vacations and sick pay) and
all tax liability resulting
from the change from the
cash to the accrual method
of accounting.
Closing Net. . . . . . Operating income of Acquiree for the
Operating Income period January 1, 1997 to December
1, 1997 as reflected in
Acquiree's financial
statement prepared in
accordance with the
requirements of GAAP before
federal and state taxes or
interest expense or
interest income.
Effective Date . . . . March 2, 1996
Effective Date . . . . Unaudited balance sheet of Acquiree
Balance Sheet as of the Effective Date prepared in
accordance with GAAP
containing all accruals
including but not limited
to all payroll accruals
(bonuses, commissions,
vacations and sick pay) and
all tax liability resulting
from the change from the
cash to the accrual method
of accounting.
Financial . . . . . . Unaudited financial statements of
Statements the Acquiree for the fiscal years
ended December 31, 1997,
December 31, 1996, and
December 31, 1995 prepared
in accordance with the
requirements of GAAP.
Interim Financial . . Unaudited financial statements of the
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Statements Acquiree for the interim
period from January 1, 1998
through February 28, 1998
prepared in accordance with
the requirements of GAAP.
GAAP . . . . . . . . Generally accepted accounting
principles, consistently applied.
Net Operating Income Subsequent to the Closing Date and
(NOI) . . . . . . . . with respect to the ongoing business
formerly conducted by
Acquiree gross revenue
(billed services at invoice
value reduced by customer
discounts, returns and
allowances) minus cost of
sales, all operating
expenses directly
attributable to Acquiree
and general and
administrative expenses,
but excluding (a) RCM
Corporate Fees; (b) Federal
and state income taxes; (c)
goodwill amortization; and
(d) acquisition interest
expense.
Net Working Capital . The amount by which all realizable
current assets of Acquiree,
including accounts receivable but
excluding all fixed assets and
intangible assets as those terms are
defined under GAAP, exceeds all of
Acquiree's liabilities.
Xxxxxxxxxxx . . . . . Xxxxx Xxxxxxxxxxx
RCM . . . . . . . . . RCM Technologies, Inc., a Nevada
corporation.
RCM Corporate Fees. . All costs incurred by RCM not
directly related to the
ongoing business conducted
by Acquiree such as legal,
accounting and SEC filing
fees.
SEC . . . . . . . . . The Securities and Exchange
Commission.
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 Shareholder will sell, convey, assign, transfer and
deliver the Acquiree Shares to RCM, and RCM
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shall purchase, acquire and accept from the Acquiree Shareholder the Acquiree
Shares, which shall constitute one hundred percent (100%) of the outstanding
capital stock of Acquiree.
2.2 Purchase Consideration.
On the Closing Date, (i) Acquiree Shareholder shall deliver to
RCM certificates representing the Acquiree Shares; and (ii) RCM shall pay to the
Acquiree Shareholder the purchase consideration in the sum of $5,700,000 plus an
amount equal to the Net Working Capital of Acquiree as determined in accordance
with Section 2.3 hereof, subject to adjustments as hereafter set forth (the
"Purchase Consideration") as follows:
$3,700,000 - by wire transfer of immediately
available funds to bank accounts
designated by Acquiree Shareholder;
$300,000 - post closing consideration payable
within sixty (60) days following the
close of any four (4) month period
occurring during initial two years
following the Closing Date during
which the aggregate NOI of
Acquiree's ongoing operations equals
or exceeds $333,000 (the "Post
Closing Consideration");
$1,700,000 - deferred consideration payable in
two (2) equal annual instalments of
$850,000 each within sixty (60) days
following March 31, 1999 and March
31, 2000 (the "Deferred
Consideration") provided that in the
event the NOI of Acquiree is less
than $1,000,000 for any year in
which a payment is due (the
"Shortfall") then the amount of the
installment payable for the first
year following the Closing shall be
reduced by $4.00 for each $1.00 of
Shortfall, and shall be reduced by
$3.00 for each $1.00 of Shortfall
for the second year following the
Closing Date. As used herein the
term "year" means the years ending
March 31, 1999 and 2000.
Net Working Capital - by wire transfer in accordance with
Section 2.3 hereof.
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2.3 Payment of Net Working Capital. To the extent that the
Cash Balance At Closing is positive, then at the Closing RCM will pay to
Acquiree Shareholder by wire transfer of immediately available funds an amount
equal to the Cash Balance At Closing. Such payment will be deducted from the Net
Working Capital proceeds. Within sixty (60) days of the Closing Date, RCM and
the Acquiree Shareholder will cause to be prepared to their mutual satisfaction
the Net Working Capital Balance Sheet. Thereafter RCM, as agent for Acquiree,
shall use best efforts to promptly and fully collect all of Acquiree's accounts
receivable and other current assets as they are reflected in the Net Working
Capital Balance Sheet. RCM shall cause to be paid to the Acquiree Shareholder as
additional Purchase Consideration by wire transfer to bank accounts designated
by him the amount of the accounts receivable and other current assets actually
collected less Acquiree's liabilities as set forth on the Net Working Capital
Balance Sheet. Subject to RCM's due diligence RCM will advance to Acquiree on
the Closing Date a sum equal to fifty percent (50%) of the Accounts Receivable
At Closing. To the extent the Cash Balance At Closing is negative the advance on
the Accounts Receivable At Closing shall be offset by such amount. In any case
the remaining Accounts Receivable At Closing not advanced must equal or exceed
1.5 times all unpaid liabilities. Such advance shall be deducted from the Net
Working Capital proceeds.
2.4 Additional Purchase Consideration. If the NOI for any year
in which an installment of Deferred Consideration is due exceeds $1,000,000,
then twenty-five percent (25%) of the amount over and above and in excess of
$1,000,000 shall be accrued as additional consideration and, within sixty (60)
days of the end of such year, be paid as additional consideration to those
persons designated in Schedule 2.4 hereof in the proportions described in that
Schedule.
2.5 Deferred Consideration. In any year in which an
installment of Deferred Consideration is due, the Acquiree Shareholder and his
authorized representatives, at his expense, during normal business hours, shall
have the right to audit the financial records of Acquiree to verify the
calculation of NOI and any Shortfall. For each year in which an installment of
Deferred Consideration is due, RCM will furnish the Acquiree Shareholder with
year end financial statements for Acquiree.
3. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND THE ACQUIREE
Shareholder. The Acquiree and the Acquiree Shareholder, 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 on 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.
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3.1 Shareholder of Acquiree. The Acquiree Shareholder is, and
will be on the Closing Date, the sole owner, of record and beneficially, of all
the issued and outstanding shares of the Acquiree's capital stock.
3.2 Financial Statements.
(a) The Financial Statements for the fiscal years
ended December 31, 1997, December 31, 1996 and December 31, 1995 ("1997, 1996
and 1995 Financial Statements") have been attached as Schedule 3.2(a). The 1997,
1996 and 1995 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 GAAP.
(b) RCM and the Acquiree Shareholder will cause to
be prepared to their mutual satisfaction the Effective Date Balance Sheet and
the Net Working Capital Balance Sheet as defined in Section 1 hereof which will
be prepared on an unaudited basis in accordance with GAAP and delivered to RCM
promptly following the Closing. The Effective Date Balance Sheet and the Net
Working Capital Balance Sheet as defined in Section 1 hereof and the financial
information contained therein will present fairly the financial condition of the
Acquiree for the periods covered.
(c) 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.
3.3 Undisclosed Liabilities. Acquiree does not have any
liabilities or obligations of any nature, fixed or contingent, that will not be
shown or otherwise provided for in the Financial Statements, except (a) as set
forth in Schedule 3.3, and (b) for liabilities and obligations arising
subsequent to the date of the Financial Statements in the ordinary course of
business, none of such liabilities referred to in this clause (b) will
individually or in the aggregate be materially adverse to the business or
financial condition of the Acquiree. There are no material loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5 of
the Financial Accounting Standards Board) of the Acquiree that will not be
adequately provided for.
3.4 Accounts Receivable. Attached hereto as Schedule 3.4 is a
list of all accounts receivable of Acquiree as of _________ __, 1998 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
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reserves, if any, established within the Financial Statements, are collectible
in full and are not subject to offset or counterclaim or otherwise in
controversy.
3.5 Material Adverse Changes. Except as specifically stated in
Schedule 3.5 or as contemplated or required by this Agreement, from January 1,
1997 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) 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; or
(e) Except as set forth in Schedule 3.5(e) there has
not been 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.
3.6 Litigation. Except as set forth in Schedule 3.6, there are
no actions, suits, claims, investigations or legal, administrative or
arbitration proceedings pending or, to the actual knowledge of Acquiree
Shareholder, threatened against the Acquiree, whether at law or in equity, or
before or by any federal, state, municipal, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, or, to the
actual knowledge of Acquiree Shareholder, any basis for any such action, suit,
claim, investigation or proceeding.
3.7 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
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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 Shareholder know 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 that would have an adverse effect on the business of
Acquiree.
3.8 Due Organization. The Acquiree is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California; it 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 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 3.8.
3.9 (a) Taxes. Except as disclosed on Schedule 3.9, 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 in all material
respects; 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 therefor has been made on the Financial
Statements. Except as disclosed on Schedule 3.9, 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 Shareholder of any tax claim,
investigation or proceeding. All monies required to be collected or withheld by
the Acquiree for income taxes, social security or 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. Set forth on Schedule
3.9 is a list of all actions 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
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of the Code (determined without regard to subsection (b)(4) thereof). Acquiree
Shareholder will be responsible for filing on behalf of Acquiree the short
period S corporation tax return for the period ended ______________, 1998.
Simultaneously with the filing of the short period S corporation return Acquiree
Shareholder will cause to be filed an Application For Change In Accounting
Method (IRS Form 3115) to change Acquiree's method of accounting from cash to
accrual. Any tax liability arising from the change in accounting method over and
above the amount shown for this liability on the Closing Date Balance Sheet
shall be the obligation of the Acquiree Shareholder.
(b) Tax Election. Acquiree and RCM shall jointly
make an election under Section 338(h)(10) of the Code (and any corresponding
election under state or local tax law) (collectively a "Section 338(h)(10)
Election"). Acquiree and RCM shall (i) take, and cooperate with each other to
take, all actions necessary and appropriate (including filing such forms,
returns, elections, schedules and other documents as may be required) to effect
and preserve a timely Section 338(h)(10) Election in accordance with Section 338
of the Code and the Temporary Regulations thereunder or any successor
provisions, and execute and deliver all such required documents including IRS
Form 8023 at the Closing); and (ii) Acquiree and RCM shall report the sale of
the Acquiree Shares pursuant to this Agreement consistent with Section
338(h)(10) and shall take no position contrary thereto or inconsistent therewith
in any tax return, and discussion with or proceeding before any taxing
authority, or otherwise. RCM and Acquiree Shareholder shall, within sixty (60)
days after the date on which the Tax Election is filed, jointly prepare an
allocation of the "adjusted grossed-up basis" (as defined in Treasury Regulation
1.338(b)-1 among Acquiree's assets in accordance with Section 338 of the Code
and the Treasure Regulations thereunder (the "Allocation") consistent with the
Effective Date Balance Sheet and providing, if necessary, for adjustments to
take into account the payment of Post Closing Consideration, Deferred
Consideration and Additional Deferred Consideration pursuant to Sections 2.2 and
2.4 hereof. All such adjustments on account of the payment of Post Closing
Consideration, Deferred Consideration and Additional Deferred Consideration
shall increase on a dollar for dollar basis the amount allocated to goodwill.
The parties agree to adopt and abide by the Allocation in all federal and state
tax filings and to take no positions inconsistent therewith. Any tax liability
arising from the filing of the Section 338(h)(10) Election shall be the
obligation of the Acquiree Shareholder.
3.10 Agreements. Schedule 3.10 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 3.10 have been or will have been made
available
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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 3.10.
Neither the Acquiree nor the Acquiree Shareholder have knowledge of any material
default by the other parties to such contracts or agreements.
3.11 Title to Property and Related Matters. The Acquiree has,
and at the time of the Closing will have, good and marketable title to all of
its 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 3.11, and (ii) liens for current taxes not yet delinquent.
Schedule 3.11 also contains a general description of all real property in which
Acquiree has an ownership interest. Except as set forth in said Schedule 3.11
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.
3.12 Licenses; Trademarks; Trade Names. Except as set forth on
Schedule 3.12, 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.
3.13 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 or agreement 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 3.13 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
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by the Acquiree of this Agreement or the consummation of the
transactions contemplated hereby.
3.14 Capitalization. The authorized capitalization of the
Acquiree consists of 1,000 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 3.14, 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 3.14 sets forth the share
ownership and respective percentage of each of the Acquiree Shareholder.
3.15. Brokerage Fees. Except for Delhi And Dublin Ventures,
Inc., whose fees shall be paid by Acquiree as disclosed on Schedule 5.10, 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.
3.16 Share Ownership. The Acquiree Shares will be owned of
record and beneficially by the Acquiree Shareholder, 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.
3.17 Obligation of the Acquiree Shareholder. This Agreement
constitutes the valid and legally binding obligation of the Acquiree
Shareholder. Except as set forth on Schedule 3.17, 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 the Acquiree
Shareholder or any contract, commitment, agreement or restriction of any kind to
which the Acquiree Shareholder is a party or by which the Acquiree Shareholder
is bound.
3.18 Approvals Required. Except as set forth on Schedule 3.18
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
Shareholder of this Agreement or the consummation by them of the transactions
described herein, except to the extent that Acquiree Shareholder may be required
to file reports in accordance with relevant regulations under federal and state
securities laws upon
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execution of this Agreement and/or consummation of the transactions
contemplated hereby.
3.19 Employee; Benefit Plans.
(a) Schedule 3.19 sets forth the number and names of
the employees of Acquiree and the total 1997 compensation to each of the
directors, officers and employees of Acquiree.
(b) Except as disclosed on Schedule 3.19, 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 3.19 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 3.19,
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 has it 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 3.19 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 3.19, 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 3.19, 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
conditions, employee benefit plans and the payment of withholding and social
security taxes.
3.20 Environmental Matters. Except as set forth in Schedule
3.20 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
12
Acquiree or Acquiree Shareholder have received any notification of any asserted
present or past failure to so comply with such laws, rules or regulations.
Acquiree has obtained and is in compliance with all permits, licenses and other
authorizations required under federal, state and local laws relating to
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"). There are no 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.
3.21 Insurance. Schedule 3.21 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, the underwriter, policy number, coverage type, premium, expiration date
and deductible. All of the insurance policies listed on Schedule 3.21 are
outstanding and in full force and effect and all premiums required to be paid
with respect to such policies are currently paid.
3.22 Bank Accounts. Schedule 3.22 contains a list of all
bank accounts maintained by, or for the benefit of, Acquiree.
3.23 Customers. Set forth on Schedule 3.23 is a list of the
ten (10) largest customers of Acquiree based on the dollar volume of income
generated by that customer for the twelve month period ended December 31, 1997.
No such customer has terminated or, to Acquiree's knowledge, is presently
threatening to terminate its relationship with Acquiree.
3.24 Approval. The Board of Directors of the Acquiree has
approved the execution of this Agreement and the transactions contemplated
hereby.
3.25 Contractors. With respect to the Acquiree's contractors,
consultants and other independent personnel (the "Contractors"), the Acquiree
has evaluated and classified the Contractors as independent contractors or
employees in accordance
13
with Internal Revenue Service regulations. Acquiree has maintained, monitored,
continues to maintain and monitor those Contractors who are independent
contractors to assure compliance with Internal Revenue Service regulations.
3.25 Termination of Agreements. Schedule 3.30 contains a list
of all Agreements between the Acquiree on the one hand and its Shareholder on
the other. All such Agreements have been terminated absolutely at or prior to
the Closing Date without any liability on the part of Acquiree.
4. REPRESENTATIONS AND WARRANTIES OF RCM. As a material inducement to
the Acquiree and the Acquiree Shareholder 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
Shareholder, which representations and warranties are true and correct in all
material respects at this date, and will be true and correct in all material
respects on the Closing Date as though made on and as of such date.
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; it 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 Bylaws of
RCM, including any amendments thereto, are attached hereto as Schedule 4.1.
4.2 Compliance; Governmental Authorizations. 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. 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
14
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 or agreement of any kind to which RCM 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 Delhi And Dublin Ventures, Inc.
whose fees shall be paid by Acquiree, 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 has approved the
execution of this Agreement and the transactions contemplated hereby.
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.
5.1 Disclosure Documents.
(a) RCM shall supply to Acquiree the necessary
information in writing, or cause the necessary information to be supplied in
writing, relating to RCM for inclusion in any document(s) to be delivered to
Acquiree Shareholder in connection with seeking their approval of the
transactions contemplated by this Agreement.
15
(b) Acquiree shall supply to RCM the necessary
information in writing, or cause the necessary information to be supplied in
writing, relating to Acquiree for inclusion in any documents or reports to be
filed with the SEC or any regulatory agency in connection with the transactions
contemplated by this Agreement.
5.2 Access to Information. At all times prior to the Closing
Date or the earlier termination of this Agreement in accordance with the
provisions of Section 11, each of the parties hereto shall provide to the other
parties (and the other parties' authorized representatives) full access during
normal business hours to the premises, properties, books, records, assets,
liabilities, operations, contracts, personnel, financial information and other
data and information of or relating to such party (including without limitation
all written proprietary and trade secret information and documents, and other
written information and documents relating to intellectual property rights and
matters), and will cooperate with the other party in conducting its due
diligence investigation of such party.
5.3 Confidentiality.
(a) Confidentiality of RCM-Related Information.
With respect to information concerning RCM that is made available to Acquiree or
Acquiree Shareholder pursuant to the provisions of Section 5.2, Acquiree and
Acquiree Shareholder agree that they shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the transactions contemplated by this Agreement and shall not
disseminate or disclose any of such information other than to representatives
who need to know such information for the sole purpose of evaluating the
transactions to be undertaken pursuant to this Agreement (each of whom shall be
informed in writing by Acquiree of the confidential nature of such information
and directed by Acquiree to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Section 11, Acquiree and
Acquiree Shareholder shall immediately return all such information, all copies
thereof and all information prepared by Acquiree based upon the same, upon RCM's
request; provided, however, that one copy of all such material may be retained
by Acquiree's outside legal counsel for purposes only of resolving any disputes
under this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that (i) is learned by Acquiree or the Acquiree
Shareholder from a third party entitled to disclose it; (ii) became known
publicly other than through Acquiree or the Acquiree Shareholder or any party
who received the same through Acquiree or the Acquiree Shareholder; (iii) is
required by law or court order to be disclosed by Acquiree or the Acquiree
Shareholder (after notice and opportunity to oppose such disclosure); or (iv) is
disclosed with the express prior written consent thereto of RCM. Acquiree or the
Acquiree
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Shareholder shall undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this subparagraph (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 contemplated by 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 RCM to treat such information confidentially). If
this Agreement is terminated pursuant to the provisions of Section 11, RCM shall
immediately return 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) became known publicly other than through RCM or any party who received
the same through RCM; (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 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 (b);
5.4 Nondisclosure. Neither RCM, nor Acquiree nor Acquiree
Shareholder shall disclose to the public or to any third party the existence of
this Agreement or the transactions contemplated hereby or any other material
non-public information concerning or relating to the other parties hereto, other
than with the express prior written consent of the other parties 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 representatives 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
17
connection with this Agreement; or any regulatory body where such disclosure is
required under federal or state law.
5.5 Non-Competition.
(a) As a material inducement for RCM to enter into
this Agreement Xxxxxxxxxxx agrees that he will not, for the period during which
Deferred Consideration is payable to Acquiree Shareholder and for a period of
two (2) years following the payment of the last installment of Deferred
Consideration to Acquiree Shareholder (the "Restricted Period") within the
counties of __________________, California, directly or indirectly, whether as
employee, owner, partner, agent, director, officer or shareholder, engage in the
business of contract or temporary staffing of technical personnel. As used
herein "technical personnel" means information technology, engineering and
manufacturing professional personnel. Without limiting the generality of the
foregoing Xxxxxxxxxxx shall not do any of the following:
(i) Solicit, divert, accept business of
contract or temporary staffing of technical personnel from any client of
Acquiree who is or was a client during the term of Parandhaman's employment,
including all clients directly or indirectly produced or generated by
Xxxxxxxxxxx.
(ii) Solicit, induce or contract with any of the
Acquiree's employees to leave Acquiree or to work for Xxxxxxxxxxx or any company
with which Xxxxxxxxxxx is connected.
(iii) Solicit, divert or take away any of
Acquiree's sources of business of contract or temporary staffing of technical
personnel.
(b) Xxxxxxxxxxx will not at any time without the
authorization of RCM disclose to, or make use of for himself or for any person,
corporation, or other entity, any trade secret or other confidential information
concerning the business, clients, methods, operations, financing or services of
RCM or its affiliates. Trade secrets and confidential information shall mean
information disclosed to Xxxxxxxxxxx or known by him as a consequence of his
relationship with Acquiree and not generally known in the industry. Without
limiting the generality of the foregoing, trade secrets and confidential
information shall include market analysis and market expansion plans of RCM and
all technical information relating to products or systems developed or being
developed by RCM and all planned system improvements or changes.
(c) The provisions of this Section shall be
construed as an agreement independent of any other provision of this Agreement
and the existence of any claim or cause of action of Xxxxxxxxxxx against
Acquiree whether arising out of this Agreement
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or otherwise shall not constitute a defense to the enforcement by
Acquiree of the provisions of this paragraph.
(d) Xxxxxxxxxxx agrees that a violation of any of
the provisions of this Section 5.5(a) hereof will cause irreparable damage to
Acquiree the exact amount of which it will be impossible to ascertain and, for
that reason, Xxxxxxxxxxx agrees that Acquiree shall be entitled to injunctive
relief restraining any violation of this Section 5.5(a) hereof by Xxxxxxxxxxx
and any person, firm or corporation associated with him, such right to be
cumulative and in addition to all other remedies available to Acquiree by reason
of such violation.
5.6 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.
5.7 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.
5.8 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.
5.9 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.
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5.10 Bonuses and Fees. Except as set forth on Schedule 5.10
any and all accrued bonuses or other compensation over and above historic
compensation levels which may be due and owing to the Acquiree Shareholder and
fees owing to Delhi And Dublin Ventures, Inc. shall be discharged and Acquiree
released from such obligations on or before the Closing Date.
5.11 Documents at Closing. Each party to this Agreement agrees
to execute and deliver on the Closing Date those documents identified in Section
6.2.
5.12 Interim Operations of RCM and Acquiree. Except as
contemplated by this Agreement, including any Exhibits and Schedules hereto, or
to the extent that the parties shall otherwise consent in writing or as
otherwise identified in Schedule 3.5 during the period from the date of this
Agreement and continuing until the Closing Date, each of RCM and Acquiree shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts to preserve intact
their present organizations of such business, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it and they shall not take
any action, or fail to take any action, that is reasonably likely to result in
any of their respective representations and warranties set forth in this
Agreement becoming untrue as though such representations and warranties are made
as of and on the Closing Date.
5.13 Prohibition on Trading in RCM Stock. The Acquiree and
Acquiree Shareholder acknowledge that the United States Securities Laws prohibit
any person who has received material non-public information concerning the
matters which are the subject matter of this Agreement from purchasing or
selling the securities of 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 Shareholder agrees that he 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 filing of a Current Report on Form 8-K with the SEC announcing the
Closing pursuant to this Agreement.
5.14 Independent Contractors. If, with respect to any period
prior to the Closing, any governmental authority (i) challenges the status as
independent contractors of any of Acquiree's contractors; or (ii) asserts the
applicability to Acquiree's employees or contractors of statutes, ordinances or
20
regulations regulating the wages, working conditions and hours of employment of
such individuals, then after any final determination (with Acquiree Shareholder
having the right to control and pay the costs and counsel fees in connection
with any agency examination or determination) any payroll or other taxes and any
interest or penalties attributable thereto and any liability for additional
employment compensation and any fines or penalties connected therewith shall be
the obligation of the Acquiree Shareholder, and shall be paid to RCM within ten
(10) days thereafter or, at the option of RCM, shall be subject to
indemnification provided for in Section 9 hereafter.
5.15 Revocation of S Corporation Election. Prior to the
Closing Acquiree shall take any and all actions necessary to revoke its election
to be treated as an S Corporation pursuant to the Code.
6. THE CLOSING.
6.1. The Closing. The closing ("Closing") of the purchase and
sale and other transactions contemplated by this Agreement shall take place (a)
at the offices of Xxxxxxx & Xxxx, P.C., 0000 Xxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, XX 00000, 1:30 p.m. local time on __________, 1998, or (b) at such
other time and place and on such other date as RCM and Acquiree or Acquiree
Shareholder 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 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 the Acquiree Shareholder will
deliver, or cause to be delivered, to RCM the following:
(i) stock certificates representing the
Acquiree Shares being surrendered hereunder, duly endorsed with stock powers
attached in blank;
(ii) all corporate records of the Acquiree,
including without limitation corporate minute books (which shall contain copies
of the Articles of Incorporation and Bylaws, as amended to the Closing Date),
stock books, stock transfer books, corporate seals; and such other corporate
books and records as may reasonably be requested by RCM and its counsel;
(iii) a certificate executed by the Acquiree
and the Acquiree Shareholder to the effect that all representations
21
and warranties made by the Acquiree and the Acquiree Shareholder 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 California, 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 "A" signed by _______________ and Acquiree;
(ix) an Employment Agreement described in
Exhibit "B) signed by ____________________ and Acquiree;
(x) an Employment Agreement substantially in
the form of Exhibit "A" signed by Acquiree and such Employees of
Acquiree as are selected by RCM;
(xi) resignations of all officers and directors
of Acquiree;
(xii) evidence satisfactory to RCM of the
termination of the Agreements described in Schedule 3.30 hereof.
(xiii) such documents as may be needed to
accomplish the Closing under the corporate laws of the states of
incorporation of RCM and Acquiree;
(xiv) 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;
(xv) an opinion of counsel for Acquiree and
Acquiree Shareholder in the form attached hereto as Exhibit "C";
(xvi) an election under Section 338(h) of the
Internal Revenue Code executed by Acquiree.
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(xvii) any documentation associated with the
transactions contemplated by Section 5.15 of this Agreement.
(b) RCM will deliver or cause to be delivered to the
Acquiree and the Acquiree Shareholder:
(i) a certificate of RCM's Secretary to the
effect that all representations and warranties made by RCM under this Agreement
are true and correct as of the Closing Date, as though originally given to the
Acquiree and the Acquiree Shareholder on said date;
(ii) 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;
(iii) certified resolution of the Secretary of
RCM dated at or about the Closing Date authorizing the transactions
contemplated under this Agreement;
(iv) an opinion of counsel for RCM in the form
attached hereto as Exhibit "D".
(v) an Employment Agreement described in
Exhibit "A" signed by ______________ and Acquiree;
(vi) an Employment Agreement described in
Exhibit "B" signed by _____________ and Acquiree;
(vii) an Employment Agreement substantially in
the form of Exhibits "A" signed by RCM and such employees of
Acquiree as are selected by RCM;
(viii) such documents as may be needed to
accomplish the Closing under the corporate laws of the state of
incorporation of RCM and Acquiree;
(ix) 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
(x) An election under Section 338(h) of the
Internal Revenue Code executed by RCM.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND THE ACQUIREE
SHAREHOLDER. All obligations of the Acquiree and the Acquiree Shareholder under
this Agreement are subject to the fulfillment, prior to or on the Closing Date
(unless otherwise stated herein), of each of the following conditions, any one
or all of which may be waived by the Acquiree or the Acquiree Shareholder:
23
7.1 The Board of Directors of RCM shall have approved the
execution of this Agreement and the transactions contemplated hereby.
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 Shareholder pursuant to the provisions hereof at
the Closing Date shall be true in all respects at and as of the time of the
Closing Date as though such representations and warranties were made at and as
of such time.
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 Shareholder.
7.5 There shall be delivered to the Acquiree and the Acquiree
Shareholder 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 obtained the approval of its principal
lender of this Agreement and the transactions contemplated hereby.
7.8 RCM shall have executed an Employment Agreement with
_____________ and such other employees of Acquiree as may be selected by RCM
substantially in form and substance similar to that attached hereto as Exhibit
"A, respectively.
7.9 Acquiree Shareholder 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.
7.10 All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and
24
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.
7.11 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 shall have approved
the execution of this Agreement and the transactions contemplated hereby.
8.2 The representations and warranties made by the Acquiree
and the Acquiree Shareholder contained in this Agreement or in any certificate
or document delivered to RCM 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.
8.3 The Acquiree and the Acquiree Shareholder shall have
performed and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by
them prior to or 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 the Acquiree Shareholder to the effect that the
representations and warranties of each 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.
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8.7 RCM shall have obtained the approval of its principal
lender of this Agreement and the transactions contemplated thereby.
8.8 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 the Acquiree Shareholder 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.
8.9 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.
8.10 Acquiree's Closing Net Operating Income shall not be less
than $1,000,000.
8.11 Such employees of Acquiree as may be selected by RCM
shall each have executed an Employment Agreement substantially in form and
substance similar to that attached hereto as Exhibits "A".
8.12 Acquiree and the Acquiree Shareholder 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)(xi).
8.13 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 Acquiree Shareholder. The Acquiree Shareholder shall
indemnify, defend and hold harmless RCM from and against any and all demands,
claims, actions or causes of action, judgments, assessments, losses,
liabilities, damages or penalties and reasonable attorneys' fees and related
disbursements (collectively, "Claims") incurred by RCM which arise out of or
result from a misrepresentation, breach of warranty, or breach of any covenant
of Acquiree or the Acquiree Shareholder contained herein or in the Schedules
annexed hereto or in any other documents or instruments furnished by the
Acquiree or the Acquiree Shareholder pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
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9.2 RCM. RCM shall 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 misrepresentation, breach of warranty or breach of any covenant of RCM
contained herein or in the Schedules annexed hereto or in any 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, if shorter, a period to a date not less than
10 days prior to when a responsive pleading or other document is required to be
filed but in no event less than 10 days from delivery or mailing of the Claim
Notice) (the "Notice Period") to notify the Indemnitee (i) whether or not it
disputes the Claim and (ii) if liability hereunder is not disputed, whether or
not it desires to defend the Indemnitee. If the Indemnitor elects to defend by
appropriate proceedings, such proceedings shall be promptly settled or
prosecuted to a final conclusion in such a manner as to minimize any risk of
additional damage to the Indemnitee; and all costs and expenses of such
proceedings and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not
control, any such defense or settlement, it may do so at its sole cost and
expense. If the Indemnitor has disputed the Claim, as provided above, and shall
not defend such Claim, the Indemnitee shall have the right to control the
defense or settlement of such Claim, in its sole discretion, and shall be
reimbursed by the Indemnitor for its reasonable costs and expenses of such
defense if it shall thereafter be found that such Claim was subject to
indemnification by the Indemnitor hereunder.
(b) Non-Third Party Claims. In the event that the
Indemnitee should have a Claim for indemnification hereunder which does not
involve a Claim being asserted against it or sought to be collected by a third
party, the Indemnitee shall promptly send a Claim Notice with respect to such
Claim to the Indemnitor. If the Indemnitor does not notify the Indemnitee within
the Notice Period that it disputes such Claim, the Indemnitor shall pay the
amount
27
thereof to the Indemnitee. If the Indemnitor disputes the amount of such Claim,
the controversy in question shall be submitted to arbitration pursuant to
Section 10 hereof.
(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.
9.6 Right of Set Off. The amount of any Claims as to which RCM
is entitled to indemnification hereunder may be set off by RCM first against the
Deferred Consideration and, to the extent the amount of such Deferred
Compensation is insufficient to cover such Claims, then against amounts
remaining payable as Additional Purchase Consideration and/or the Post Closing
Consideration.
10. Arbitration. If a dispute arises as to interpretation of this
Agreement, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by RCM, one by the Acquiree Shareholder, and the third by the said
two arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Philadelphia, Pennsylvania. The decision of a majority of the arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. Each
party shall pay the fees and expenses of the arbitrator appointed by it, its
counsel and its witnesses. The parties shall share equally the fees and expenses
of the impartial arbitrator.
11. 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 either of RCM and Acquiree:
(i) if the Closing shall not have occurred by the
Closing Date unless such date is extended by the mutual written agreement of RCM
and Acquiree, and in such event, only until the date the Closing Date has been
so extended; provided, however, that the right to terminate this Agreement under
this Section 11(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
28
in, the failure of the Closing Date to occur on or before that
date; or
(ii) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) If any party hereto shall default in the observance or in
the due and timely performance of any of the Covenants of the parties contained
in Section 5 of this Agreement, the non-defaulting party may, upon written
notice, terminate this Agreement and in that event, the defaulting party shall
indemnify, hold harmless and assume full and complete responsibility for any and
all expenses of the non-defaulting party incurred in this transaction, without
prejudice to its or their rights and remedies available under law, including the
right to recover expenses, costs and other damages. Notwithstanding the
foregoing, the non-defaulting party may elect to waive such breach by the
defaulting party and proceed with the Closing, thereby waiving any right to
damages as a result of such breach.
12. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or sent by overnight delivery, confirmed telecopy or prepaid
first class registered or certified mail, return receipt requested, to the
following addresses, or such other addresses as are given to the other parties
to this Agreement in the manner set forth herein:
12.1 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 copy to:
Xxxxxx X. Xxxxxx, Esquire
Xxxxxxx & Bach, P.C.
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
12.2 If to the Acquiree Shareholder, to:
29
Xxxxx Xxxxxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
12.3 If to the Acquiree, to:
Global Technology Solutions Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
With a copy to:
Any such notices shall be effective when delivered in person or sent by
telecopy, one business day after being sent by overnight delivery or three
business days after being sent by registered or certified mail. Any of the
foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of address shall be effective
only upon receipt.
13. 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 required 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
30
this Agreement shall bind and inure to the benefit of the successors and assigns
of all parties hereto.
13.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
It supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
13.5 Amendment. This Agreement may not be amended,
supplemented or modified in whole or in part except by an instrument in writing
signed by the party or parties against whom enforcement of any such amendment,
supplement or modification is sought.
13.6 Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties.
13.7 Choice of Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of New Jersey.
13.8 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.9 Number and Gender, Words used in this Agreement,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context indicated is appropriate.
13.10 Construction. The parties hereto and their respective
legal counsel participated in the preparation of this Agreement, therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
13.11 Effect of Waiver. The failure of any party at any time
or times to require performance of any provision of this Agreement will in no
manner affect the right to enforce the same. The waiver by any party of any
breach of any provision of this Agreement will not be construed to be a waiver
by any such party of any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
13.12 Severability. The invalidity, illegality or
unenforceability of any provision or provisions of this Agreement will not
affect any other provision of this Agreement, which will remain in full force
and effect, nor will the invalidity, illegality or unenforceability of a portion
of any provision of this Agreement affect the balance of such provision. In the
event
31
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
13.13 Binding Nature. This Agreement will be binding upon and
will inure to the benefit of any successor or successors of the parties hereto.
13.14 No Third-Party Beneficiaries. No person shall be deemed
to possess any third-party beneficiary right pursuant to this Agreement. It is
the intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
13.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
13.16 Facsimile Signature. This Agreement may be executed and
accepted by facsimile signature and any such signature shall be of the same
force and effect as an original signature.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RCM TECHNOLOGIES, INC.
ATTEST:
By: By:
Name:
Title:
GLOBAL TECHNOLOGY SOLUTIONS INC.
ATTEST:
By: By:
Name:
Title:
XXXXX XXXXXXXXXXX
00
00
