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Re:
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RCM Technologies, Inc.
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Preliminary Proxy Statement on Schedule 14A
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Filed October 21, 2013 by IRS Partners No. 19, L.P. et al.
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File No. 001-10245
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1.
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Given the recent filing of the preliminary proxy statement referenced above, please advise us of the filing persons’ present intention to amend their Schedule 13D. Refer to Exchange Act Rule 13d-2(a), Item 4 of Schedule 13D and the obligation to file required amendments “promptly.”
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2.
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Please ensure that a reasonable basis for each opinion or belief exists. Support for opinions or beliefs should be self-evident, disclosed in your materials or provided to the staff on a supplemental basis with a view toward disclosure. We cite the following example of statements or assertions in your materials, which at a minimum, must be supported on a supplemental basis.
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Notwithstanding a market capitalization of roughly $73 million, the Board and management have recognized, since 2000, approximately $150 million in write-offs associated with goodwill and other intangibles as a result of ill-advised acquisitions while experiencing a decline in EBITDA from approximately $23.6 million to $7.3 million, or nearly 70% (page 11, emphasis added). Please provide support for the causal effect between the acquisitions and the cited financial measures. Also disclose the years in which such “ill-advised acquisitions” occurred.
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We believe the Rights Plan, with a 15% beneficial ownership trigger, well below the level considered appropriate by ISS... (page 12, emphasis added). It is our understanding that ISS does not oppose rights plans with limited durations of less than one year.
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Glass Lewis, another leading proxy advisory firm, also believes, “that poison pill plans generally are not in the best interests of stockholders” and “can reduce management accountability by substantially limiting opportunities for corporate takeovers” (page 12).
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[If] Mr. Kopyt is thereafter terminated (without cause) or leaves the Company for “good reason,” he is entitled to receive a windfall payout of more than $6 million (page 19).
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in addition to [the potential $6 million] payout, Mr. Kopyt could become entitled to additional payments under a separate severance agreement with the Company to the extent such payments are in excess of the severance package he may be entitled to receive under his termination benefits agreement (page 19).
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3.
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Refer to the last sentence of the third bullet point on page 8. It is our understanding that when RCM adopted its stockholder rights plan in January 2013, the rights plan had a 15% ownership threshold and the Company has not taken any action to lower such threshold. While this sentence is merely quoting a statement actually made by Mr. Vizi, the filing persons have chosen to affirmatively include it in their proxy statement. To the extent the substance of such statement is incorrect, please revise accordingly.
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4.
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Refer to the last bullet point on page 9 and similar disclosure on pages 11, 13 and 15 of the filing persons’ proxy statement. According to disclosure on page 14 of the Company’s proxy statement, Mr. Vizi telephoned Mr. Miller on September 23, 2013 and conveyed that the Stockholder Group wanted the Board’s declassification delayed until the 2014 Annual Meeting as opposed to the 2013 Annual Meeting. Notwithstanding such request, the Company’s proxy statement indicates that the Board will implement the declassification at the 2013 Annual Meeting. Please revise the disclosure here and elsewhere to clarify, if true, that while the Board did eliminate classification of the Board, it did not adopt the Stockholder Group’s specific declassification proposal. Also disclose the Stockholder Group’s specific declassification proposal, including the year in which it wanted such proposal to be implemented.
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5.
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The first sentence of this paragraph incorrectly describes the referenced time period ending on December 31, 2012 as the “past five years.” In addition, it is our understanding that the Company’s shares last traded at $9.99 on July 16, 2007, which was more than six years ago. Please revise accordingly.
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6.
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Refer to the second paragraph. It is our understanding that the last time the Company wrote off goodwill was in the fourth quarter of 2008, almost five years ago. Yet the heading of this subsection along with the referenced paragraph creates the implication that such write-offs have occurred more recently. Please revise this section to specify the dates that such write-offs were taken and why, if the last write-off occurred in 2008, it is still a cause for concern currently.
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7.
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Refer to the last sentence. Provide support for the statement that the Nominees “would have significant ‘skin in the game’ which would promote significantly greater accountability to all stockholders” or revise accordingly. In responding to this comment, please address the following points:
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Mr. Vizi personally holds only 1,000 shares of RCM’s common stock and Mr. Ballou holds 5,000 shares.
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Pursuant to the Investment Advisory Agreement described on page 16 by and between Legion Partners, as the advisor, and IRS Partners, as the client, Legion Partners, Mr. Vizi and Mr. Kiper are restricted from acquiring any additional shares of RCM stock beyond those held by them on the date of the Investment Advisory Agreement, which was an aggregate of 23,000 shares, 22,000 of which are held by Mr. Kiper.
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Pursuant to the Investment Advisory Agreement, Legion Partners, as an investment advisor, has duties to serve the interests of its client, IRS Partners. Disclosure on page 16 suggests that Mr. Vizi’s compensation is dependent on Legion Partners’ performance in connection with the investment advisory services it provides IRS Partners.
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8.
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Disclosure in the first paragraph on page 15 and on page 2 indicates that “...two directors (who were formerly Class B directors) whose terms expire at the Annual Meeting are up for election at the Annual Meeting.” It is our understanding that only one of the former Class B directors, Mr. Kerr, is standing for re-election and the other Board recommended nominee, Mr. Frankel, is not an incumbent Board member. Please revise the disclosure accordingly.
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9.
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Refer to the last full paragraph on page 17 regarding the filing persons’ reservation of the right to nominate additional unidentified persons under certain circumstances. Please confirm for us that should the participants lawfully nominate substitute nominees before the meeting, the participants will file an amended proxy statement that (1) identifies the substitute nominees, (2) discloses whether such nominees have consented to being named in the revised proxy statement and to serve if elected and (3) includes the disclosure required by Items 5(b) and 7 of Schedule 14A with respect to such nominees.
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10.
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Refer to the third paragraph on page 21. Please revise to specify in greater detail the reference to the definition of independent director set forth in the NASDAQ listing standards.
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11.
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The fifth sentence of this section appears to imply that brokers, even in a contested solicitation, have discretionary authority to vote their clients’ shares on a “routine” proposal such as Proposal 2 (ratification of the Board’s selection of auditors). It is our understanding that, in a contested election, a broker does not have discretionary authority to vote on any proposals to be voted on at the meeting, whether routine or not. Please provide support for your assertion, or revise your disclosure to remove this implication.
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12.
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We note that the filing persons may solicit proxies by telephone and in person. Please be advised that all written soliciting materials, including any scripts to be used in soliciting proxies must be filed under the cover of Schedule 14A on the date of first use.
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13.
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Revise the form of proxy to identify all parties on whose behalf the solicitation is made. Currently the card only lists Legion Partners and IRS Partners No. 19. Also identify whether each separate matter has been proposed by the Company or the Stockholder Group. Refer to Exchange Act Rule 14a-4(a)(1) and (3).
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The undersigned is responsible for the adequacy and accuracy of the disclosure in the Proxy Statement;
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The Staff’s comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the Proxy Statement; and
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The undersigned may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
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IRS PARTNERS NO. 19, L.P.
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By:
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M2O, Inc., its General Partner
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By:
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/s/ Bradley Vizi
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Name:
Title:
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Bradley Vizi
As Attorney-in-Fact for Michael O’Connell, Chief Executive Officer
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THE LEONETTI/O’CONNELL FAMILY FOUNDATION
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By:
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/s/ Bradley Vizi
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Name:
Title:
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Bradley Vizi
As Attorney-in-Fact for Michael O’Connell, Secretary, Chief Financial Officer and Director
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M2O, INC.
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By:
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/s/ Bradley Vizi
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Name:
Title:
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Bradley Vizi
As Attorney-in-Fact for Michael O’Connell, Chief Executive Officer
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THE MICHAEL F. O’CONNELL AND MARGO L. O’CONNELL REVOCABLE TRUST
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By:
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/s/ Bradley Vizi
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Name:
Title:
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Bradley Vizi
As Attorney-in-Fact for Michael O’Connell, Trustee
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LEGION PARTNERS ASSET MANAGEMENT, LLC
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By:
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/s/ Bradley Vizi
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Name:
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Bradley Vizi
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Title:
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Managing Director
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/s/ Christopher Kiper
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Christopher Kiper
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/s/ Bradley Vizi
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Bradley Vizi, Individually and as attorney-in-fact for Michael O’Connell and Roger Ballou
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