Exhibit 10.1
STOCK PURCHASE AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.
SOFTWARE ANALYSIS AND MANAGEMENT, INC.
AND
THE SHAREHOLDERS OF
SOFTWARE ANALYSIS AND MANAGEMENT, 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
2.6 Percentage interest of Acquiree Shareholders in Purchase
Consideration, Net Working Capital and Additional
Purchase Consideration
3.2(a) Financial Statements for the fiscal years ended March 31,
1998, March 31, 1997 and March 31, 1996
3.3 Undisclosed Liabilities of Acquiree
3.4 Accounts Receivable of Acquiree as of May 1, 1998 and
July 10, 1998
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 Messrs. Kweitko, Wigdor and Wickramasekaran's Obligation
3.18 Approvals required to be obtained by Acquiree
Shareholders
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 March
31, 1998
3.26 Agreements to be terminated
3.27(a) List of facilities
3.27(b) Billing register
3.27(c) List of fixed assets
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 Xxx X. Xxxxxxx
Exhibit "B" Employment Agreement with Xxxxxxx Xxxxxxxx
Exhibit "C" Opinion of counsel for Software Analysis And
Management, 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"); SOFTWARE ANALYSIS AND MANAGEMENT, INC, a California
corporation, (the "Acquiree"); and XXX X. XXXXXXX, XXXXXX XXXXXX and
XXXXXXXXXXXX XXXXXXXXXXXXXXX (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:
CEDLI. . . . . . . . . California Economic Development
Lending Initiative
Code . . . . . . . . . The Internal Revenue Code of 1986,
as amended.
Closing . . . . . . . The transaction of the events set
forth in Section 6 hereof.
6
Closing Date . . . . . he day on which the Closing is held
as set forth in Section 6 hereof.
Closing Date Balance . Unaudited balance sheet of the
Sheet Acquiree as of the Closing Date
prepared in accordance with
the requirements of GAAP
containing all accruals
including but not limited
to all payroll accruals
(bonuses, commissions and
vacations) and deferrals.
Closing Net. . . . . . operating income of Acquiree for the
Operating Income period April 1, 1997 to March 31,
1998 as reflected in
Acquiree's financial
statement reflecting all
appropriate balance sheet
accruals and deferrals
prepared in accordance with
the requirements of GAAP
before federal and state
income taxes, interest
expense, professional fees
related to this
transaction, and executive
compensation (including any
Acquiree Shareholder or his
or her spouse) in excess of
$220,000 (including without
limitation related
employment taxes).
Effective Date . . . . May 1, 1998
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 and
vacations) and deferrals.
Financial . . . . . . Unaudited financial statements of
Statements the Acquiree for the fiscal years
ended March 31, 1998, March
31, 1997, and March 31,
1996 prepared in accordance
with the requirements of
GAAP.
Interim Financial . . Unaudited financial statements of the
Statements Acquiree for the interim period from
April 1, 1998 through May
31, 1998 prepared in
accordance with the
requirements of GAAP.
7
GAAP . . . . . . . . Generally accepted accounting
principles, consistently applied.
Kweitko . . . . . . . Xxx X. Xxxxxxx
Net Operating Income Subsequent to the Closing Date and
(NOI) . . . . . . . . with respect to the ongoing business
formerly conducted by
Acquiree gross revenue
(billed and unbilled
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; (d)
interest expense; and (e)
any operating expenses
directly attributable to
Acquiree after the Closing
Date to the extent they
exceed, on a pro rata
basis, amounts historically
incurred by Acquiree.
Net Working Capital . The amount by which all realizable
current assets (amounts actually
collected subsequent to the Closing
Date) of Acquiree, including cash,
certificates of deposit, accounts
receivable, employee advances,
prepaid expenses, deposits and
income tax receivable but excluding
all fixed assets, intangible assets
and deferred tax assets as those
terms are defined under GAAP,
exceeds all of Acquiree's
liabilities, excluding income taxes
payable, as reflected in the Closing
Date Balance Sheet.
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 compensation of RCM executives,
legal, accounting (including audit
costs) and SEC filing fees and other
overhead costs.
8
SEC . . . . . . . . . The Securities and Exchange
Commission.
Shareholder Percentages The following
percentage interest:
Kweitko - 25%;
Wickramasekaran - 40%;
Wigdor - 35%.
Wickramasekaran . . . Xxxxxxxxxxxx Xxxxxxxxxxxxxxx
Xxxxxx. . . . . . . . Xxxxxx Xxxxxx
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.
On the Closing Date, (i) Acquiree Shareholders shall deliver
to RCM certificates representing the Acquiree Shares; and (ii) RCM shall pay to
the Acquiree Shareholders the purchase consideration in the sum of $12,000,000
plus an amount equal to the Net Working Capital of Acquiree as determined in
accordance with Section 2.4 hereof, subject to adjustments as hereafter set
forth (the "Purchase Consideration") as follows:
$7,500,000 - by wire transfer of immediately
available funds to bank accounts
designated by Acquiree Shareholders;
$500,000 - post closing consideration payable
within sixty (60) days following the
close of any four (4) month period
occurring during the initial three
years following the Closing Date
during which the aggregate NOI of
Acquiree's ongoing operations equals
or exceeds $833,000 (the "Post
Closing Consideration");
$4,000,000 - deferred consideration payable in
three (3) equal annual installments
of $1,333,333 each within sixty (60)
days following the first, second and
third anniversaries of the Closing
9
Date (the "Deferred
Consideration") provided
that in the event the NOI
of Acquiree is less than
$2,000,000, $2,000,000 and
$2,300,000 respectively for
the initial three (3) years
in which a payment is due
(the "Shortfall") then the
amount of the installment
payable for that year shall
be reduced by $5.00 for
each $1.00 of Shortfall. As
used herein the term "year"
means the periods ending
12, 24 and 36 months
respectively following the
last day of the month in
which the Closing occurred.
In the event that
Acquiree's NOI exceeds
$2,000,000, $2,000,000 and
$2,300,000 respectively for
the initial three (3) years
in which a payment of
Deferred Consideration is
due, Acquiree Shareholders
shall have the right to
carry such excess NOI
forward or backward and
apply such excess NOI to
reduce any Shortfall.
Net Working Capital by wire transfer in accordance with
Section 2.4 hereof.
2.3 Adjustments To Purchase Consideration. If the Closing Net
Operating Income ("CNOI") of Acquiree is less than $2,200,000 then the cash
portion of the Purchase Consideration shall be reduced $3.00 and the Deferred
Consideration shall be reduced $2.00 (with each installment thereof reduced
correspondingly) for each $1.00 that the CNOI is less than $2,200,000.
2.4 Payment of Net Working Capital and Other Payments.
(i) Within sixty (60) days following the
Closing Date RCM and the Acquiree Shareholders will cause to be prepared to
their mutual satisfaction the Closing Date Balance Sheet. The Closing Date
Balance Sheet shall be used to determine the maximum amount of Net Working
Capital to be paid to the Acquiree Shareholders.
(ii) At the Closing the following liabilities
will be paid by RCM on behalf of Acquiree: (a) indebtedness to
Sanwa Bank of $____________ and (b) indebtedness to CEDLI of
$--------.
(iii) Acquiree intends to file for a tax refund
with respect to taxes paid for its fiscal year ending March 31,
10
1998 due to the carryback of net operating losses incurred after March 31, 1998
(the "Special Refund"). An amount equal to the Special Refund shall be paid to
Kweitko as a bonus ("Special Bonus") for services rendered prior to the
Effective Date when, and only to the extent, Acquiree receives the Special
Refund. The Special Refund and the corresponding liability for the Special Bonus
shall be shown as an asset and as a liability, respectively, on Acquiree's
Effective Date and Closing date Balance Sheets, but shall be disregarded for the
purpose of determining Acquiree's Net Working Capital.
(iv) The Note Payable to LIL Enterprises and
the Accrued Bonus to Kweitko for the fiscal year ending March 31, 1998 shall be
paid (a) immediately upon receipt of payment of employee advances by Kweitko,
Wickramasekaran and Wigdor, in the amount of such payments, and thereafter (b)
to the extent excess of (y) sum of the following assets listed on the Closing
Date Balance Sheet: cash, certificates of deposits, deposits, prepaid expenses,
collected accounts receivable, collected employee allowances (other than to the
extent of payments made pursuant to the preceding Section 2.4(iv)(a)) and
collected income tax receivables (excluding the Special Refund), over (z) the
total liabilities of Acquiree reflected on the Closing Date Balance Sheet (other
than the Special Bonus, the Note Payable to LIL Enterprises and the Accrued
Bonus to Kweitko).
(v) All liabilities of Acquiree other than
those referred to in Sections 2.4(ii), 2.4(iii) and 2.4(iv) will be paid by RCM
on behalf of Acquiree in the ordinary course of business.
(vi) Immediately following the Closing, RCM,
as agent for Acquiree, shall use best efforts to promptly and fully collect all
of Acquiree's accounts receivable, employee advances and income tax receivable
as they are reflected in the Closing Date Balance Sheet. Cash, certificates of
deposit, deposits and prepaid expenses shall be deemed to have been collected as
of the Closing. RCM shall cause to be paid to the Acquiree Shareholders the Net
Working Capital by wire transfer to bank accounts designated by them. The Net
Working Capital, to the extent such assets are actually collected or deemed
collected, will be paid to the Acquiree Shareholders sixty (60) days after the
Closing Date and each thirty (30) days thereafter, provided that if on any such
date the amounts collected or deemed collected up to that date do not exceed the
liabilities reflected in the Closing Date Balance Sheet RCM will not be
obligated to make any payment and will provide the Acquiree Shareholders with a
written statement of the amounts collected to such date and the amount of any
uncollected accounts receivable and other current assets. Each payment of Net
Working Capital will be accompanied by a similar statement. Any accounts
receivable which cannot be collected timely by RCM without compromise may be
collected by Acquiree Shareholders provided that no legal proceedings for their
recovery may be brought without
11
RCM's prior written approval which approval shall not be unreasonably withheld.
2.5 Additional Purchase Consideration. If the NOI for any year
in which an installment of Deferred Consideration is due exceeds $2,200,000 in
the first such year, $2,200,000 in the second such year and $2,300,000 in the
third such year, then twenty-five percent (25%) of the amount over and above and
in excess of $2,200,000, $2,200,000 and $2,300,000 respectively shall be accrued
as additional consideration and, within sixty (60) days of the anniversary of
the Closing Date, be paid as additional consideration to those persons
designated in Schedule 2.5 in the proportions described in that Schedule;
provided, however, that to the extent excess NOI is carried forward or backward
pursuant to the provisions of Section 2.2 hereof, Acquiree shall not be entitled
to Additional Purchase Consideration attributable to such amounts. In the event
that Additional Purchase Consideration is paid in year one or two and a
shortfall occurs in year two or three and such Additional Purchase Consideration
actually paid in year one or two is deemed unearned pursuant to this Section
2.5, due to Acquiree Shareholders decision to carry forward excess NOI pursuant
to Section 2.2 hereof, RCM shall deduct such amount from the Deferred
Consideration earned in year two or three.
2.6 Any amounts payable to the Acquiree Shareholders pursuant
to Sections 2.2, 2.4 and 2.5 hereof shall be paid to them in the proportions set
forth in Schedule 2.6 hereof.
2.7 Inspection of Records. In any year in which an installment
of Deferred Consideration is due, the Acquiree Shareholders and their authorized
representatives, at their expense, during normal business hours, shall have the
right to audit, abstract and copy the financial records of Acquiree to verify
the calculation of NOI and any Shortfall. RCM shall cooperate with Acquiree
Shareholders and their agents in providing access to financial information
regarding Acquiree, including accountants' work papers. For each year in which
an installment of Deferred Consideration is due, RCM will furnish the Acquiree
Shareholders with copies of monthly as well as year end financial statements of
Acquiree.
3. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND THE ACQUIREE
SHAREHOLDERS. The Acquiree and the Acquiree Shareholders, in accordance with
their respective Shareholder Percentages, 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.
12
3.1 Shareholder 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.
3.2 Financial Statements.
(a) The Financial Statements for the fiscal years
ended March 31, 1998, March 31, 1997 and March 31, 1996 ("1998, 1997 and 1996
Financial Statements") have been attached as Schedule 3.2(a). The Financial
Statements and the financial information contained therein present fairly the
financial condition of Acquiree for the periods covered. The 1998, 1997 and 1996
Financial Statements and the financial information contained therein has been
prepared in accordance with GAAP.
(b) RCM and the Acquiree Shareholders will cause to
be prepared to their mutual satisfaction the Effective Date Balance Sheet and
the Closing Date 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 Closing
Date 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, and the
financial records reflect all payroll accruals including but not limited to all
bonuses, vacations, holidays and other compensation.
3.3 Undisclosed Liabilities. Acquiree does not have any
liabilities or obligations of any nature, fixed or contingent, in excess of
$10,000 that will not be shown or otherwise provided for or reflected 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 and aging schedule pertaining
thereto as of the Effective Date and July 10, 1998. All of the accounts
receivable of Acquiree now and on the Closing Date, are bona fide accounts
receivable of Acquiree representing the
13
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 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 April 1,
1998 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
Shareholders, threatened against the Acquiree, whether at law or in equity, or
before or by any federal, state, municipal, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, or, to the
actual knowledge of Acquiree Shareholders, any basis for any such action, suit,
claim, investigation or proceeding.
14
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 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 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 Taxes.
(i) Definitions. The following terms shall have the meanings
set forth in this Section 3.9(i) for purposes of this Agreement.
"Return" and "Returns" mean any return, report,
declaration, estimate, information statement, claim for refund, notice, form or
any other kind of document, including any schedule or attachment thereto, and
including amended versions of any of the foregoing, relating to or required to
be filed in connection with any Tax.
"Tax" and "Taxes" means any federal, state (including
District of Columbia), local, foreign (including possessions or territories of
the United States) or other tax (whether income, gross receipts, franchise,
excise, customs, sales, use, value added, ad valorem, real or personal property,
license, transfer, employment, social security or any other kind of tax or
payment in lieu of tax no matter how denominated including any amount payable
pursuant to a tax-sharing or other agreement relating to the sharing or payment
of tax), or any assessment, levy, impost, withholding, fee or other governmental
charge in the nature of a
15
tax, and shall include all additions to tax, interest, penalties and fines with
respect thereto.
(ii) Except as disclosed on Schedule 3.9, Acquiree has filed
when due in a timely fashion all Returns that are required to be filed on or
before the date hereof by or with respect to the Acquiree. All such Returns are
true, correct, and complete. No claim has been made by a taxing authority in a
jurisdiction where the Acquiree does not file Returns that it is or may be
subject to or liable for any Tax imposed by that jurisdiction.
(iii) Except as disclosed on Schedule 3.9, all Taxes for which
the Acquiree is liable and that are due on or before the date hereof (whether or
not shown to be due on any Return) have been paid when due in a timely fashion.
There are no liens on any assets of the Acquiree that arose in connection with
any failure (or alleged failure) to pay any Tax other than liens for Taxes not
yet due and payable or for Taxes that the Acquiree is contesting in good faith
through appropriate proceedings as set forth on Schedule 3.9.
(iv) Acquiree has withheld or collected and paid or deposited
all Taxes required to have been withheld or collected and paid or deposited in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
(v) No taxing authority has asserted, or threatened to assert,
any adjustment, deficiency or assessment for any Taxes against the Acquiree, and
no basis exists for any such adjustment, deficiency or assessment which would
result in additional taxes owed by the Acquiree for any period for which Returns
have been filed. Schedule 3.9 lists all federal, state, local, and foreign
income Returns filed with respect to the Acquiree for taxable periods ended on
or after March 31, 1992 and indicates those Returns of the Acquiree that have
been audited and those Returns of the Acquiree that currently are the subject of
audit. The Acquiree has delivered to RCM correct and complete copies of all
federal, state, local and foreign income tax Returns filed, examination reports
issued, and statements of deficiencies assessed against or agreed to by the
Acquiree since Mach 31, 1993.
(vi) The Acquiree has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
adjustment, assessment or deficiency except for such waivers or extensions
which, by their terms, have elapsed as of the date of this Agreement.
(vii) Except as set forth on Schedule 3.9 the Acquiree has no
income or gain that may be reportable for a period ending after the date hereof
without the receipt of an equal amount of cash during such period, which is
attributable to a transaction
16
occurring in, or a change in accounting method made for, a period ending on or
prior to the date hereof.
(viii) There are no currently outstanding requests made by any
of the Acquiree for tax rulings, determinations or information that could affect
the Taxes of the Acquiree.
(ix) Schedule 3.9 lists all Returns (other than income tax
returns) filed with respect to Acquiree for taxable periods ending on or after
March 31, 1993.
(x) Acquiree has not been obligated to deduct and withhold
Taxes under Code Section 1441.
(xi) None of the Acquiree Shareholders is a nonresident alien
individual within the meaning of Code Section 7701(b) and each Acquiree
Shareholder shall deliver at Closing a "Nonforeign Certification" meeting the
requirements of Code Section 1445(b)(2).
(xii) The Acquiree is not or was not within the past six
years, a party to any Tax allocation or sharing agreement except as set forth on
Schedule 3.9. The Acquiree has not been a member of an affiliated group defined
in Code Section 1504(a) filing a consolidated federal income Tax Return and does
not have any liability for the Taxes of any person under Treasury Regulation
Section 1.1502-6 (issued under the Code) or any similar provision of state,
local, or foreign law, as a transferee or successor by contract or otherwise.
The Acquiree has not been a member of a group of companies filing a unitary,
consolidated or combined state Return except as set forth on Schedule 3.9.
(xiii) Schedule 3.9 sets forth the following information with
respect to the Acquiree as of the beginning of its current taxable year (as well
as on an estimated pro forma basis as of the Effective Date giving effect to the
passage of time and the consummation of the transactions contemplated hereby):
(a) the adjusted tax basis in its assets; (b) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign tax
credit, or excess charitable contribution of the Acquiree; and (c) the tax
elections of the Acquiree affecting the character, source, timing and
computation of income, gain, loss, deduction and credits of the Acquiree.
(xiv) 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.
(xv) The Acquiree has not made, is not obligated make, and
will not, as a result of the transactions contemplated hereby, make or become
obligated to make any "excess parachute payment"
17
within the meaning of Section 280G of the Code (determined without regard to
subsection (b)(4) thereof).
(xvi) Acquiree has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii).
(xvii) No consent under Code Section 341(f) has been filed and
no agreement has been entered which would require such consent to be filed with
respect to Acquiree.
(xviii) The Acquiree has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
(xix) The unpaid Taxes of the Acquiree will not, as of the
Effective Date and, did not, as of March 31, 1998 exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) which will be set forth on the
face of the Effective Date Balance Sheet and which is set forth on the Financial
Statement of Acquiree for the fiscal year ending March 31, 1998, respectively.
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 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 Shareholders 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
18
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, material lease, mortgage or material
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 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 100,000 shares of no par value Common Stock of which 51,000
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 Shareholders.
3.15 Brokerage Fees. Except for Cruttenden Xxxx
Incorporated, legal and accounting fees incurred in connection with
the transaction contemplated by this Agreement, which fees shall be
19
paid by the Acquiree Shareholders, 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 Shareholders, 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 Shareholders. This Agreement
constitutes the valid and legally binding obligation of the Acquiree
Shareholders. 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
Shareholders or any contract, commitment, agreement or restriction of any kind
to which the Acquiree Shareholders are a party or by which the Acquiree
Shareholders are 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
Shareholders of this Agreement or the consummation by them of the transactions
described herein, except to the extent that Acquiree Shareholders may be
required to file reports in accordance with relevant regulations under federal
and state securities laws upon execution of this Agreement and/or consummation
of the transactions contemplated hereby.
3.19 Employee Benefit Plans.
(a) Schedule 3.19 sets forth the number and names of
the administrative employees of Acquiree and the total 1997 compensation to each
of the directors, officers and administrative 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
20
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 (other than at will
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 Acquiree nor
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
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
21
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 April 1, 1997 to March
31, 1998. 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 with Internal Revenue Service regulations. Acquiree has
maintained and monitored those Contractors who are independent contractors to
assure compliance with Internal Revenue Service regulations.
3.26 Termination of Agreements. Schedule 3.26 contains a list
of all Agreements between the Acquiree on the one hand and its Shareholders 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.
3.27 Assets, Facilities and Billing. Schedule 3.27(a) contains
a list of all of Acquiree's facilities and offices as of May 31, 1998. Schedule
3.27(b) contains Acquiree's billing register as of May 31, 1998 including the
names of all direct employees, and their billing rates. Schedule 3.27(c)
contains a list of all of Acquiree's fixed assets whether owned or the subject
22
of a capitalized lease as of May 31, 1998. Each such Schedule is
true, correct and complete as of the date specified.
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; 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 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
23
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 Cruttenden Xxxx Incorporated
whose fees shall be paid by Acquiree Shareholders, 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 Shareholders in connection with seeking their approval of the
transactions contemplated by this Agreement.
(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
24
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 Shareholders pursuant to the provisions of Section 5.2, 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 11, 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 the Acquiree
Shareholders from a third party entitled to disclose it; (ii) became known
publicly other than through Acquiree or the Acquiree Shareholders or any party
who received the same through Acquiree or the Acquiree Shareholders; (iii) is
required by law or court order to be disclosed by Acquiree or the 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
the 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,
25
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
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 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 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 each of Wickramasekaran and Wigdor agrees that he will not, for a
period of three (3) years following the Closing
26
Date (the "Restricted Period") within the counties of Orange, Los Angeles, San
Bernardino and San Diego, California, directly or indirectly, whether as
employee, owner, partner, agent, director, officer or shareholder, engage in the
business of contract or temporary staffing or permanent placement of technical
personnel or engage in the business of information technology or engineering
consulting. As used herein "technical personnel" means information technology,
engineering and manufacturing professional personnel. Without limiting the
generality of the foregoing each of Wickramasekaran and Wigdor shall not do any
of the following:
(i) Solicit, divert, accept business of
contract or temporary staffing or permanent placement of technical personnel or
information technology or engineering consulting from any client of Acquiree who
is or was a client during the term of either of Wickramasekaran or Xxxxxx'x
employment with or ownership of Acquiree, including all clients directly or
indirectly produced or generated by Wickramasekaran or Wigdor.
(ii) Solicit, induce or contract with any of the
Acquiree's employees to leave Acquiree or to work for Wickramasekaran or Wigdor
or any company with which either of Wickramasekaran or Wigdor is connected.
(iii) Solicit, divert or take away any of
Acquiree's sources of business of contract or temporary staffing of technical
personnel.
(b) each of Wickramasekaran and Wigdor will not at
any time without the authorization of RCM disclose to, or make use of for
themselves 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 Acquiree or its affiliates. Trade secrets
and confidential information shall mean information disclosed to Wickramasekaran
and/or Wigdor or known by them as a consequence of their 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 by either of Wickramasekaran
and/or Wigdor against Acquiree whether arising out of this Agreement or
otherwise shall not constitute a defense to the enforcement by Acquiree of the
provisions of this paragraph.
27
(d) Each of Wickramasekaran and Wigdor agrees that
a violation of any of the provisions of this Section 5.5 hereof will cause
irreparable damage to Acquiree the exact amount of which it will be impossible
to ascertain and, for that reason, each of Wickramasekaran and Wigdor agrees
that Acquiree shall be entitled to injunctive relief restraining any violation
of this Section 5.5 hereof by each of Wickramasekaran and Wigdor and any person,
firm or corporation associated with them, such right to be cumulative and in
addition to all other remedies available to Acquiree by reason of such
violation.
(e) Notwithstanding the foregoing, during the
Restricted Period it shall not be a violation of this Section 5.5 for
Wickramasekaran to be employed on a full or part time basis as an engineer by a
customer of Acquiree or for her to provide engineering consulting services,
provided that except as stated herein Wickramasekaran does not engage in the
business of contract or temporary staffing or permanent placement of technical
personnel and does not in any way solicit, divert or accept any business from
Acquiree's current or future sources of business.
(f) In the event that following the Closing Date
Wickramasekaran and/or Wigdor becomes an employee of Acquiree or is otherwise
paid for services rendered to Acquiree after the Closing Date, then the term of
the Restricted Period shall automatically extend for three (3) years from the
termination of such employment or rendering of services.
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.
28
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.
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 Shareholders and
fees owing to Cruttenden Xxxx Incorporated 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. During such interim period Acquiree shall apply
any cash not required for ordinary operations to the reduction of its bank debt.
5.13 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
29
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 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
regulations regulating the wages, working conditions and hours of employment of
such individuals, then after any final determination (with Acquiree Shareholders
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 Shareholders, 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 Expenses. Subject to the provisions of Section 11(c)
hereof, each party shall bear its own expenses in connection with the
transactions contemplated by this Agreement.
5.16 Ongoing Operations. For a period of three (3) years
following the Closing: (i) RCM agrees to provide Acquiree with adequate working
capital, and (ii) consistent with good business practice to operate Acquiree in
a manner designed to maximize NOI.
5.17 Tax Covenants Relating to Acquiree
(a) The following provisions shall govern the allocation of
responsibility as between RCM and Acquiree Shareholders for certain Tax matters
following the date hereof.
(i) Acquiree Shareholders shall timely cause to be
prepared, executed and filed all Returns for the Acquiree for all tax periods
ending on or prior to the Closing Date which are filed after the date hereof.
Copies of all such returns shall be made available to RCM at least 10 days prior
to the date on which they are to be filed. If any such Return indicates that the
Acquiree has incurred any liability for Tax, Acquiree shall cause such Tax to be
paid to the appropriate tax authority on or before the last
30
date on which payment thereof may be made without penalty, provided, however,
that if such liability for Tax exceeds the applicable reserve for tax liability
set forth on the Effective Date Balance Sheet or the Financial Statement of
Acquiree for the fiscal year ending March 31, 1998, the Acquiree Shareholders
shall pay such amount to Acquiree within 15 days of receiving written notice of
such excess.
(ii) RCM at its expense shall timely prepare or
cause to be prepared and file or cause to be filed all Returns for the Acquiree
for Tax periods which begin before the Effective Date and end after the
Effective Date and shall pay or cause to be paid the Taxes due with respect to
such Returns. With respect to such Tax periods, Acquiree Shareholders shall be
responsible for and pay to Acquiree a pro rated amount of the Taxes of the
Acquiree calculated as described in the following Section 5.18 (a)(ii)(A) and
(B) except to the extent that such pro rated amount of Taxes has been accrued on
the Effective Date Balance Sheet or has been paid on or prior to the Effective
Date.
(A) In the case of all Taxes imposed upon or
measured by property or capital, the pro rated amount shall be based upon the
number of days in the period up to and including the Effective Date divided by
the total number of days in the tax period.
(B) In the case of all Taxes other than those
imposed upon or measured by property or capital, including but not limited to
net income taxes, gross receipts taxes, sales and use taxes, and payroll taxes,
the pro rated amount shall be based upon the transactions occurring on or before
the Effective Date.
Any amount due from the Acquiree Shareholders pursuant to this Section
5.18(a)(ii) shall be paid to the Acquiree within 15 days after receipt by the
Acquiree Shareholders of a request for payment which includes the Return, if
available, or any other document used to calculate the pro rated amount of
Taxes.
(b) All tax sharing agreements or similar agreements with
respect to or involving the Acquiree shall be terminated as of the Effective
Date and, after the Effective Date, the Acquiree shall not be bound thereby or
have any liability thereunder.
(c) All transfer (including real estate), documentary, sales,
use, stamp, registration and other such Taxes incurred in connection with this
Agreement shall be paid by Acquiree Shareholders when due, and Acquiree
Shareholders shall, at their own expense, file all necessary Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and, if required by applicable law, RCM will, and
will cause its affiliates to, join in the execution of any such Returns and
other documentation.
31
(d) RCM and the Acquiree Shareholders shall cooperate fully
(and cause the Acquiree to cooperate fully), as and to the extent reasonably
requested by the other party, in connection with the preparation, execution and
filing of Returns and claims for refund of tax pursuant to this Agreement and
any audit, contest, litigation or other proceeding with respect to Taxes. Such
cooperation shall include retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making themselves, in the case of the
Acquiree Shareholders, and employees, in the case of the RCM, available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Acquiree Shareholders agree (1) to retain all
books and records with respect to Tax matters pertinent to the Acquiree relating
to any Tax period beginning before the date hereof until the expiration of the
stature of limitations (and, to the extent notified by RCM, any extensions
thereof) of the respective taxable periods (unless such items were transferred
to RCM pursuant to this Agreement), and to abide by all record retention
agreements entered into with any Tax authority, and (2) to give RCM reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the RCM so requests, Acquiree Shareholders shall allow RCM
to take possession of such books and records.
(e) RCM and the Acquiree Shareholders agree, upon request, to
use their best effort to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(f) RCM and Acquiree Shareholders agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Code Section 6043 and all Regulations promulgated
thereunder.
(g) RCM shall promptly notify the Acquiree Shareholders in
writing of the commencement of any claim, audit, examination, or other proposed
change or adjustment by any tax authority concerning any Tax or other similar
claim or assessment for which the Acquiree Shareholders may be responsible (a
"Tax Claim"); provided, however, that failure to give such notice shall not
relieve any party from its obligation to indemnify with respect to any such Tax
Claim except to the extent of actual prejudice. Acquiree Shareholders shall have
the right to employ counsel of their choice at their expense and to participate
with RCM, in resolving any dispute of Taxes with respect to tax periods
beginning before the date hereof through the appropriate administrative offices
and in the courts, and shall have primary responsibility for the conduct of any
such proceedings relating solely to periods ending on or before the Effective
Date.
32
(h) Except as otherwise provided in this Section 5.18, the
party preparing a Return or required to prepare a Return shall control
resolution of any audit or investigation, and any proceedings with taxing
authorities, with respect to the Tax liability relating to such Return. However,
the party entitled to control any such audit, investigation or proceeding may,
at its sole option, extend to the party with economic liability for any Taxes at
issue therein the opportunity to assume the defense of the matter.
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 Paul, Hastings, Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx, at 1:30 p.m. local time on July __, 1998, 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) The Effective Date is the date mutually agreed
upon by the parties as the date on which the purchase and sale and other
transactions contemplated by this Agreement shall be deemed to have occurred
subject to the further agreement that the proceeds of Acquiree's business
operations between the Effective Date and the Closing Date are the property of
RCM.
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 Shareholders 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 Shareholders to the effect that all representations and
warranties made by the Acquiree and the Acquiree Shareholders under this
Agreement are true and correct as of the Closing Date, as though originally
given to RCM on said date;
33
(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 Xxx Xxxxxxx and Acquiree;
(ix) an Employment Agreement described in
Exhibit "B) signed by Xxxxxxx Xxxxxxxx and Acquiree;
(x) resignations of all officers and directors
of Acquiree;
(xi) evidence satisfactory to RCM of the
termination of the Agreements described in Schedule 3.26 hereof.
(xii) such documents as may be needed to
accomplish the Closing under the corporate laws of the states of
incorporation of RCM and Acquiree;
(xiii) 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;
(xiv) an opinion of counsel for Acquiree and
Acquiree Shareholders in the form attached hereto as Exhibit "C";
(xv) any documents associated with the
transaction contemplated by Section 3.9(b) hereof;
(xvii) Termination (UCC-3) of Financing
Statements executed by Sanwa Bank of California and California
Economic Development Lending Initiative.
(b) RCM will deliver or cause to be delivered to the
Acquiree and the Acquiree Shareholders:
34
(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 Shareholders 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 Xxx X. Xxxxxxx and Acquiree;
(vi) an Employment Agreement described in
Exhibit "B" signed by Xxxxxxx Xxxxxxxx and Acquiree;
(vii) such documents as may be needed to
accomplish the Closing under the corporate laws of the state of
incorporation of RCM and Acquiree;
(viii) such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement, or that may be reasonably requested in furtherance of the
provisions of this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND THE 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 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 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.
35
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 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 Xxx
X. Xxxxxxx and Xxxxxxx Xxxxxxxx substantially in form and substance similar to
that attached hereto as Exhibit "A" and "B", respectively.
7.9 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.
7.10 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.
7.11 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
36
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 Shareholders 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 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 the Acquiree Shareholders 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.
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 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.
37
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 $2,200,000 and total indebtedness for borrowed money (excluding
indebtedness to LIL Enterprises) as reflected in the Effective Date Balance
Sheet shall not exceed $1,240,000.
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 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)(x).
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 Shareholders. The Acquiree Shareholders shall
indemnify, defend and hold RCM harmless each according to his or her Shareholder
Percentage 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 Shareholders
contained herein or in the Schedules annexed hereto or in any certificate
delivered at the Closing pursuant to this Agreement.
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 misrepresentation, breach of warranty or breach of any covenant of RCM
contained herein or in the Schedules annexed hereto or in any certificate
delivered at the Closing pursuant to this Agreement.
9.3 Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted as follows:
38
(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 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
39
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.
9.7 Minimum for Indemnification. Acquiree Shareholders shall
not be required to make any indemnification payments under Section 9.3 except to
the extent that the cumulative amount of all Claims incurred by RCM exceeds the
sum of $25,000, in which case RCM shall be entitled to indemnification subject
to the other limitations set forth herein to the amount by which Claims exceed
$25,000. Claims relating to Taxes and to representations made fraudulently shall
be subject to full indemnification irrespective of the $25,000 minimum.
9.8 Cumulative Liability. The cumulative liability of the
Acquiree Shareholders (excluding Claims relating to representations made
fraudulently which shall not be subject to any limit) under this Section 9 shall
not exceed in the aggregate an amount equal to fifty percent (50%) of the
Purchase Consideration actually earned by the Acquiree Shareholders.
9.9 Offsetting Benefits. In the event that either RCM or the
Acquiree Shareholders are entitled to indemnification hereunder the amount
thereof shall be reduced by any insurance proceeds or other third party payments
received on account of such Claim.
9.10 Effect on NOI. In the event RCM is entitled to
indemnification hereunder RCM shall not deduct the amount of such Claim or
Claims in calculating NOI for purposes of ascertaining the Deferred
Consideration pursuant to Section 2.2 hereof or Additional Purchase
Consideration pursuant to Section 2.4 hereof.
10. ARBITRATION.
(i) If a dispute arises between the parties concerning the
calculation of NOI, net worth or any other accounting matter then such dispute
shall be referred to a neutral, mutually agreed upon "big six" accounting firm
or any other accounting firm mutually acceptable to the parties (the
"Independent Accountant") for resolution. The decision of the Independent
Accountant shall be final and binding on the parties as to all matters referred
to him. The expense of the Independent Accountant shall be the obligation of the
loser in the dispute, provided that if the discrepancy between the amount
finally arrived at by the Independent Accountant and the amount originally
proposed is less than 10% of the amount originally proposed or $10,000, then the
party requesting the Independent Accountant shall pay the expenses thereof.
(ii) If the dispute is as to a non-financial matter then it
shall be decided by a single arbitrator in an arbitration proceeding conforming
to the Rules of the American Arbitration
40
Association applicable to commercial arbitration. The arbitration shall take
place in Orange County, California. The decision of the arbitrator shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The losing
party in the arbitration shall pay the fees and expenses of the 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
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
41
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 & Xxxx, 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 Shareholders, to:
Xxx X. Xxxxxxx:
Xxx X. Xxxxxxx
0000 Xxxxxx Xxxx Xxx
Xxxxxxxxx, XX 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
Xxxxxx Xxxxxx:
Xxxxxx Xxxxxx
00000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
Xxxxxxxxxxxx Xxxxxxxxxxxxxxx:
Xxxxxxxxxxxx Xxxxxxxxxxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
42
With a copy to:
Xxxxxxx X. Xxxxxxx, Esquire
Paul, Hastings, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
12.3 If to the Acquiree, to:
Software Analysis And Management, Inc.
0000 X. Xxxxxxx - Xxxxx 000
Xxxxxx, XX 00000
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
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 and in any certificate delivered
pursuant to this Agreement shall survive the Closing Date and continue in full
force and effect for a period of two (2) years thereafter; provided, however,
that (i) the representations and warranties of Acquiree and Acquiree
43
Shareholders contained in Sections 3.1, 3.8, 3.9, 3.13, 3.14, 3.20 and 3.25 and
Claims for periods prior to the Closing for additional premiums arising from an
audit of any workers compensation or other insurance policy, for additional
unemployment taxes, and for violations of any state wage payment law; and (ii)
the covenants of RCM regarding payment of the Purchase Consideration and the
Deferred Consideration, and access to information in Sections 2.2, 2.3, 2.4, 2.5
and 2.6 hereof, shall survive the Closing Date and continue in full force and
effect subject to any applicable statutes of limitation. All covenants and
agreements by or on behalf of the parties hereto that are contained or
incorporated in this Agreement shall bind and inure to the successors and
permitted assigns of all the 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 indicated 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.
44
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 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 WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
RCM TECHNOLOGIES, INC.
ATTEST:
By: By:
Name:
Title:
[Signatures continued on next page]
45
SOFTWARE ANALYSIS AND MANAGEMENT, INC.
ATTEST:
By: By:
Name:
Title:
XXX X. XXXXXXX
XXXXXX XXXXXX
XXXXXXXXXXXX XXXXXXXXXXXXXXX
[NSB\RCM\SAMCO STOCK PURCHASE AGREEMENT]
46
