-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BhX4tE2ehapuZ4T17mmAaereQIMAKNLcumGUoqBWPSFMTDSrW3lTlnir69ZgdYRe ydRg3wcvQ+EC/QsaO8hoVg== 0000700841-96-000013.txt : 19960321 0000700841-96-000013.hdr.sgml : 19960321 ACCESSION NUMBER: 0000700841-96-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961031 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960320 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000700841 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 951480559 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10245 FILM NUMBER: 96536382 BUSINESS ADDRESS: STREET 1: 2500 MCCLELLAN AVE STE 350 CITY: PENNSAUKEN STATE: NJ ZIP: 08109 BUSINESS PHONE: 6094861777 MAIL ADDRESS: STREET 1: 2500 MCCLELLAN AVENUE STREET 2: STE 350 CITY: PENNSAUKEN STATE: NJ ZIP: 08109-4613 8-K 1 8-K CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report March 19, 1996 (Date of earliest event reported) RCM TECHNOLOGIES, INC. (exact name of registrant as specified in its charter) NEVADA (State or other jurisdiction of incorporation) 1-10245 95-1480559 (Commission File Number) (IRS Employer ` Identification Number) 2500 McClellan Avenue, Pennsauken, NJ 08109-4613 (Address of principal executive offices) (Zip Code) (609) 486 - 1777 (Registrant's telephone number, including area code) ITEM 2. Acquisition or Disposition of Assets. On March 11, 1996, RCM Technologies, Inc. ("Registrant") acquired The Consortium ("Consortium"), a Fairfield, New Jersey-based supplier of temporary employees, computer consultants, health care professionals and executive search services to businesses and institutions primarily in New York, New Jersey and Pennsylvania. The acquisition was completed through a stock purchase transaction (the "Purchase") pursuant to which Consortium, through an exchange of all its outstanding shares of stock with the Registrant, became a wholly-owned subsidiary of the Registrant. The Purchase consideration payable to the former shareholders of Consortium consisted of 6,500,000 shares of the Registrant's common stock (the "Shares") valued at $5,000,000. The acquisition has been accounted for under the purchase method of accounting. The cost in excess of net assets acquired will be approximately $4,419,546. It is anticipated the cost in excess of net assets acquired will be amortized over a 40 year period. The Purchase consideration paid by the Registrant was determined by negotiations between and among the representatives of the Registrant and Consortium. The former shareholders of Consortium were Barry Meyers, Martin Blaire, Marie Wolfson, Howard Ross and Alexander Valcic. Following the Purchase, the executive officers of the Registrant will be Leon Kopyt, Stanton Remer, Barry Meyers and Martin Blaire. As part of the Purchase, 1,625,000 of the Shares were delivered into escrow as collateral to secure the obligation of the former Consortium shareholders to indemnify the Registrant for income tax liabilities of Consortium, in excess of $1,100,000 and for possible indemnification of certain other potential liabilities. The Shares are subject to certain restrictions on resale, however, the Registrant has agreed to file a shelf registration statement by February 15, 1997, permitting the sale of $600,000 in value of securities during the period April 1997 through March 1998. Thereafter, the remainder of the Shares are subject to significant restrictions on resale through March 11, 1999. Consortium's assets consist of cash, accounts receivable, contracts and office equipment. These assets are used in providing temporary employees, computer consultants, health care professionals and executive search services to businesses and institutions. The Registrant plans for Consortium to continue such course of business under its control. Prior to the Purchase, no material relationship existed between Consortium and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of any such director or officer. ITEM 7. Financial Statements and Exhibits. (a) Financial statements of business acquired Audited Balance Sheets, December 31, 1995 and 1994 Audited Statements of Income, Years ended December 31, 1995, 1994 and 1993 Audited Statements of Changes in Stockholders' Equity, Years ended December 31, 1995, 1994 and 1993 Audited Statements of Cash Flows, Years ended December 31, 1995, 1994 and 1993 Financial Statements and Exhibits (Continued) (b) Pro forma financial information Unaudited Pro Forma Condensed Combined Balance Sheets, October 31, 1995 and January 31, 1996 Unaudited Pro Forma Condensed Combined Statements of Income for the year ended October 31, 1995 and the three months ended January 31, 1996. ITEM 7. (c) Exhibits (1) Stock Purchase Agreement, dated March 1, 1996 (2) Registration Rights Agreement, dated March 11, 1996 (3) Escrow Agreement, dated March 11, 1996 (4) Investor Representation Certificate, dated March 11, 1996 (5) Standstill and Shareholders Agreement, dated March 11, 1996 (6) Employment Agreement, dated March 11, 1996 (Martin Blaire) (7) Employment Agreement, dated March 11, 1996 (Barry Meyers) ITEM 7. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED THE CONSORTIUM FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995 THE CONSORTIUM INDEX TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995 PAGE INDEPENDENT AUDITORS' REPORT........................................... 1 FINANCIAL STATEMENTS Balance Sheet...................................................... 2 Statement of Income ............................................... 3 Statement of Changes In Stockholders' Equity....................... 4 Statement of Cash Flows............................................ 5 Notes to Financial Statements...................................6 - 10 INDEPENDENT AUDITORS' REPORT To the Stockholders The Consortium Fairfield, New Jersey We have audited the accompanying balance sheet of The Consortium as of December 31, 1995, and the related statements of income, changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Consortium as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/Citrin Cooperman & Company, LLP CERTIFIED PUBLIC ACCOUNTANTS February 13, 1996 THE CONSORTIUM BALANCE SHEET DECEMBER 31, 1995
ASSETS (Note D) Current assets: Cash (Note B).......................................................................................$ 9,100 Accounts receivable (net of allowance for doubtful accounts of $76,000) (Note G).................................................................... 3,965,150 Prepaid expenses and other current assets........................................................... 246,282 Total current assets.......................................................................... 4,220,532 Furniture and equipment, net (Notes A(4) and C)........................................................ 29,653 Other assets (Note A(6))............................................................................... 201,023 --------- TOTAL.........................................................................................$4,451,208 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft......................................................................................$ 145,812 Note payable - stockholders (Note D)................................................................ 1,000,000 Note payable - bank (Note D)........................................................................ 480,000 Accounts payable and accrued expenses............................................................... 284,871 Accrued payroll..................................................................................... 575,508 Payroll and income taxes payable.................................................................... 100,698 Deferred taxes payable (Note A(5)).................................................................. 183,865 Total current liabilities.................................................................. 2,770,754 Commitments (Notes D and E) Stockholders' equity: Common stock - $1, par value; 100,000 shares authorized; 11,861 shares issued and 10,927 shares outstanding (Note H)........................................................... 10,927 Stock subscription receivable....................................................................... (10,027) Retained earnings................................................................................... 1,684,554 Less: treasury stock - 934 shares at cost .......................................................... (5,000) Total stockholders' equity ................................................................ 1,680,454 TOTAL......................................................................................$4,451,208
The accompanying notes are an integral part of this statement. - 2 - THE CONSORTIUM STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 Gross revenue (Note G).................................................................................$26,361,303 Direct expenses........................................................................................ 19,913,106 Gross margin........................................................................................... 6,448,197 Selling expenses....................................................................................... 3,158,418 General and administrative expenses.................................................................... 3,215,360 Interest expense, net.................................................................................. 82,162 ---------- Loss from operations before benefit of income taxes.................................................... (7,743) Income tax benefit (Notes A(5) and F).................................................................. (49,006) ---------- NET INCOME.............................................................................................$ 41,263 ========== The accompanying notes are an integral part of this statement.
- 3 - THE CONSORTIUM STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1995
Common Retained Treasury Stock Earnings Stock Total Balance January 1, 1995.....................$ 900 $1,643,291 $(5,000) $1,639,191 Recapitalization of common stock to $1 par value............................. 10,027 10,027 Stock subscription receivable............................... (10,027) (10,027) Net income.................................. 41,263 41,263 ------- --------- ------ --------- BALANCE DECEMBER 31, 1995...................$ 900 $1,684,554 $(5,000) $1,680,454 ======= ========= ====== =========
The accompanying notes are an integral part of this statement. - 4 - THE CONSORTIUM STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995
Cash flows from operating activities: Net income..........................................................................................$ 41,263 ---------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization................................................................. 49,081 Deferred tax benefit.......................................................................... (57,727) Changes in operating assets and liabilities: (Increase) in accounts receivable................................................................ (144,194) (Increase) in prepaid expenses and other current assets.......................................... (65,159) (Decrease) in cash overdraft .................................................................... (234,626) Increase in accounts payable and accrued expenses................................................ 47,142 Increase in accrued payroll...................................................................... 71,391 Increase in payroll and income taxes payable..................................................... 29,293 (Increase) in other assets....................................................................... (2,500) ---------- Total adjustments............................................................................. (307,299) ---------- Net cash used in operating activities............................................................... (266,036) ---------- Cash flows from investing activities: Purchase of furniture and equipment................................................................. (4,439) ---------- Net cash used in investing activities............................................................... (4,439) ---------- Cash flows from financing activities: Net borrowings from note payable - bank............................................................. 270,000 ---------- Net cash provided by financing activities........................................................... 270,000 ---------- NET DECREASE IN CASH................................................................................... (475) Cash - January 1, 1995................................................................................. 9,575 ---------- CASH - DECEMBER 31, 1995...............................................................................$ 9,100 ========== Supplemental cash flow information: Cash paid during year for: Interest.........................................................................................$ 77,192 Income taxes.....................................................................................$ 1,937
The accompanying notes are an integral part of this statement. - 5 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (Note A) - Summary of Significant Accounting Policies: 1. Organization: The Consortium (the "Company") was incorporated under the laws of the State of New Jersey on May 19, 1975. The Company provides executive search, temporary employees, computer consultants and health care professionals to businesses and institutions primarily in New York, New Jersey and Pennsylvania. 2. Use of Estimates: The preparation of financial statements requires the Company's management to estimate the current effects of transactions and events whose ultimate outcomes may not be determinable until future years. Consequently, the estimated current effects could differ from the effects of the ultimate outcomes. 3. Fair Value of Financial Instruments: Effective for years ended after December 15, 1995, FASB Statement No. 107, "Disclosure about Fair Value of Financial Instruments", requires disclosure of the fair value of specified financial instruments for which it is practicable to estimate that value. The Statement provides that (a) fair value may be estimated either by reference to quoted market prices, valuation models or independent valuations and (b) practicable means that an estimate of fair value can be made without incurring excessive costs. As of December 31, 1995, the fair value of cash, accounts receivable, accounts payable and accrued expenses and short-term borrowings approximated their carrying amount. 4. Furniture and Equipment: Furniture and equipment are stated at cost. Depreciation and amortization are computed by the use of the Modified Accelerated Cost Recovery System (MACRS). Such depreciation and amortization does not differ materially from that which would have been recorded under generally accepted accounting principles. Expenditures for renewals and betterments which extend the originally estimated useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. - 6 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (Note A) - Summary of Significant Accounting Policies (Continued): 5. Income Taxes: The Company prepares its income tax returns using the cash basis method of accounting. Under this method, certain revenues are recognized when received rather than when earned and certain expenditures are recognized when paid rather than when incurred. Deferred taxes are provided for based upon the resulting temporary differences. The Company, with the consent of its shareholders has elected under the Internal Revenue Code and New York State Tax Law to be an S corporation. The shareholders of an S corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision for federal income taxes has been included in these financial statements. The provision for New York State income tax has been included to the extent the corporate tax rate exceeds the highest personal income tax rate. The Company is subject to New Jersey State, New York City and Pennsylvania State income taxes. 6. Restrictive Covenants: Restrictive covenants, arising from the acquisition of other companies are being amortized on the straight-line method over periods prescribed by the Internal Revenue Code. Such amortization does not differ materially from that which would have been recorded under generally accepted accounting principles. Amortization expense aggregated $27,283 for the year ended December 31, 1995. (Note B) - Cash: The Company maintains cash balances at several financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1995, the Company's uninsured cash balances totaled approximately $103,000. - 7 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (Note C) - Furniture and Equipment: Furniture and equipment are summarized as follows: Estimated Useful Lives Furniture and equipment..................$298,002 5 to 7 years Leasehold improvements................... 12,803 Life of Lease ------- ................... 310,805 Accumulated depreciation and amortization....................... 281,152 Total.................................$ 29,653 Depreciation and amortization expense aggregated $21,798 for the year ended December 31, 1995. (Note D) - Related Party Transactions: Certain stockholders of the Company have entered into a loan agreement with a bank whereby the stockholders may borrow up to $1,000,000; the proceeds of which are to be used solely by the Company. The loan bears interest at the bank's base lending rate plus .75% per annum (9.25% at December 31, 1995). Borrowings under the agreement have been guaranteed by the stockholders, as well as cross-guaranteed by the Company. Outstanding borrowings on this loan at December 31, 1995 were $1,000,000 and are due on demand. Additionally, the Company has a line of credit with a commercial bank in the amount of $1,000,000. Under the terms of the agreement, outstanding borrowings are due on demand with interest payable monthly at the bank's base lending rate plus 1% per annum. The line is secured by the Company's eligible accounts receivable, and the remaining assets of the Company, and it is personally guaranteed by certain stockholders of the Company. Outstanding borrowings on this loan at December 31, 1995 were $480,000. Interest expense on these loans aggregated $82,360 during 1995. - 8 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (Note E) - Commitments: 1. The Company leases office space at six locations under noncancelable leases expiring on various dates through 1999. The Company's future minimum rental payments required under these leases are as follows: Year Ending December 31, 1996.....................................................$190,444 1997..................................................... 151,147 1998..................................................... 138,933 1999..................................................... 77,000 Total.................................................$557,524 Rent expense for the year ended December 31, 1995 aggregated $212,501. In addition, the Company is obligated for escalations for the Company's proportionate share of increases in real estate taxes and operating costs, on certain of these leases. 2. The Company entered into a consulting agreement with an entity owned by a former stockholder. This agreement provides for an aggregate of $195,000 to be paid to this entity in varying annual installments through December 31, 1997. As of December 31, 1995, the Company paid $145,000 under the terms of the agreement. The shares of the former stockholder have been placed in escrow as collateral under this agreement. - 9 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (Note F) - Benefit for Taxes: The provision (benefit) for state and city income taxes consists of the following: Current.............................. $ 8,721 Deferred: Liability - accrual basis adjustments........................ $ (4,838) Asset - net operating loss carryforwards. (52,889) ------- Net deferred taxes.................. (57,727) ------- Total............................. $(49,006) ======= The current provision includes New York City taxes calculated on an alternative method. For income tax purposes, the Company has net operating loss carryforwards aggregating approximately $1,071,000 which are available to reduce future state taxable income, if any, through the year 2010. (Note G) - Major Customer: During 1995 the Company derived approximately 9.7% of gross revenue from one customer, pursuant to a contract to provide temporary employees. At December 31, 1995 approximately $321,381 is included in accounts receivable from this customer. (Note H) - Common Stock: During 1995, the Company revised its capital structure from 10,300 shares of no par value common stock to 100,000 shares of $1 par value common stock. (Note I) - Subsequent Event: During January, 1996, the stockholders of the Company signed a Letter of Intent for a Stock Purchase Agreement whereby 100% of the Company's stock will be exchanged for 6,500,000 shares in the acquiring public company, as defined. At December 31, 1995 the last quoted market price of the acquiring Company's stock was $.625 per share. - 10 - THE CONSORTIUM INDEX TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1994 PAGE INDEPENDENT AUDITORS' REPORT........................................ 1 FINANCIAL STATEMENTS Balance Sheet............... .................................... 2 Statement of Income and Retained Earnings........................ 3 Statement of Cash Flows.......................................... 4 Notes to Financial Statements...................................5 -8 INDEPENDENT AUDITORS' REPORT To the Stockholders The Consortium Fairfield, New Jersey We have audited the accompanying balance sheet of The Consortium as of December 31, 1994, and the related statements of income and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Consortium as of December 31, 1994, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/Citrin Cooperman & Company, LLP CERTIFIED PUBLIC ACCOUNTANTS February 17, 1995 THE CONSORTIUM BALANCE SHEET DECEMBER 31, 1994
ASSETS (Note C) Current assets: Cash ...........................................................................................$ 9,575 Accounts receivable (Note G)........................................................................ 3,820,956 Prepaid expenses and other current assets........................................................... 181,123 Total current assets.......................................................................... 4,011,654 Furniture and equipment, net (Notes A(2) and B)........................................................ 47,012 Other assets (Note A(4))............................................................................... 225,806 TOTAL.........................................................................................$4,284,472 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft......................................................................................$ 380,438 Note payable - stockholders (Note C)................................................................ 1,000,000 Note payable - bank (Note C)........................................................................ 210,000 Accounts payable and accrued expenses............................................................... 237,729 Accrued payroll..................................................................................... 504,117 Payroll and income taxes payable.................................................................... 71,405 Deferred taxes payable (Note A(3)).................................................................. 241,592 Total current liabilities.................................................................. 2,645,281 Commitments (Notes C and D) Stockholders' equity: Common stock - no par value; 10,300 shares authorized; 9,125 shares issued and 8,191 shares outstanding..................................................................... 900 Retained earnings................................................................................... 1,643,291 Less: treasury stock - 934 shares at cost (Note F).................................................. (5,000) Total stockholders' equity................................................................. 1,639,191 TOTAL......................................................................................$4,284,472
The accompanying notes are an integral part of this statement. - 2 - THE CONSORTIUM STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1994
Gross revenue (Note G).................................................................................$23,755,769 Direct expenses........................................................................................ 20,599,538 Gross profit............................................................................... 3,156,231 General and administrative expenses.................................................................... 2,876,246 Interest expense, net.................................................................................. 48,599 Income from operations before provision for income taxes............................................... 231,386 Provision for income taxes (Notes A(3) and E).......................................................... 20,740 NET INCOME............................................................................................. 210,646 Retained earnings - January 1, 1994.................................................................... 1,432,645 RETAINED EARNINGS - DECEMBER 31, 1994..................................................................$ 1,643,291
The accompanying notes are an integral part of this statement. - 3 - THE CONSORTIUM STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1994
Cash flows from operating activities: Net income..........................................................................................$ 210,646 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization................................................................. 49,658 Deferred taxes................................................................................ 42,940 Changes in operating assets and liabilities: (Increase) in accounts receivable................................................................ (1,196,080) (Increase) in prepaid expenses and other current assets.......................................... (55,619) Increase in cash overdraft ...................................................................... 5,530 Increase in accounts payable and accrued expenses................................................ 133,649 Increase in accrued payroll...................................................................... 167,954 Increase in payroll and income taxes payable..................................................... 22,850 Decrease in security deposits.................................................................... 537 Total adjustments............................................................................. (828,581) Net cash used in operating activities............................................................... (617,935) Cash flows from investing activities: Purchase of furniture and equipment................................................................. (24,612) Payment for restrictive covenant.................................................................... (155,000) Net cash used in investing activities............................................................... (179,612) Cash flows from financing activities: Purchase of treasury stock.......................................................................... (5,000) Net borrowings from note payable - bank............................................................. 210,000 Net borrowings from note payable - stockholders..................................................... 580,000 Net cash provided by financing activities........................................................... 785,000 NET DECREASE IN CASH................................................................................... (12,547) Cash - January 1, 1994................................................................................. 22,122 CASH - DECEMBER 31, 1994...............................................................................$ 9,575 Supplemental cash flow information: Cash paid during year for: Interest.........................................................................................$ 48,091 Income taxes.....................................................................................$ 5,374
The accompanying notes are an integral part of this statement. - 4 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (Note A) - Summary of Significant Accounting Policies: 1. Organization: The Consortium (the "Company") was incorporated under the laws of the State of New Jersey on May 19, 1975. The Company provides executive search, temporary employees, computer consultants and health care professionals to businesses and institutions primarily in New York, New Jersey and Pennsylvania. 2. Furniture and Equipment: Furniture and equipment are stated at cost. Depreciation and amortization are computed by the use of the Modified Accelerated Cost Recovery System (MACRS). Such depreciation and amortization does not differ materially from that which would have been recorded under generally accepted accounting principles. Expenditures for renewals and betterments which extend the originally estimated useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. 3. Income Taxes: The Company prepares its income tax returns using the cash basis method of accounting. Under this method, certain revenues are recognized when received rather than when earned and certain expenditures are recognized when paid rather than when incurred. Deferred taxes are provided for based upon the resulting temporary differences. The Company, with the consent of its shareholders has elected under the Internal Revenue Code and New York State Tax Law to be an S corporation. The shareholders of an S corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision for federal income taxes has been included in these financial statements. The provision for New York State income tax has been included to the extent the corporate tax rate exceeds the highest personal income tax rate. The Company is subject to New Jersey State, New York City and Pennsylvania State income taxes. 4. Restrictive Covenants: Restrictive covenants, arising from the acquisition of other companies are being amortized on the straight-line method over periods prescribed by the Internal Revenue Code. Such amortization does not differ materially from that which would have been recorded under generally accepted accounting principles. Amortization expense aggregated $27,561 for the year ended December 31, 1994. - 5- THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (Note B) - Furniture and Equipment: Furniture and equipment are summarized as follows: Estimated Useful Lives Furniture and equipment...........$293,563 5 to 7 years Leasehold improvements............ 12,803 Life of lease ....... 306,366 Accumulated depreciation and amortization................ 259,354 Total..........................$ 47,012 Depreciation and amortization expense aggregated $22,097 for the year ended December 31, 1994. (Note C) - Related Party Transactions: Certain stockholders of the Company have entered into a loan agreement with a bank whereby the stockholders may borrow up to $1,000,000; the proceeds of which are to be used solely by the Company. The loan bears interest at the bank's base lending rate plus 1% per annum (8.5% at December 31, 1994). Borrowings under the agreement have been guaranteed by the stockholders, as well as cross-guaranteed by the Company. Outstanding borrowings on this loan at December 31, 1994 were $1,000,000. Additionally, the Company has a line of credit with a commercial bank in the amount of $1,000,000. Under the terms of the agreement, outstanding borrowings are due on demand with interest payable monthly at the bank's base lending rate plus 1% per annum. The line is secured by the Company's eligible accounts receivable, and the remaining assets of the Company, and it is personally guaranteed by certain stockholders of the Company. Outstanding borrowings on this loan at December 31, 1994 were $210,000 Interest expense on these loans aggregated $48,716 during 1994. - 6 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (Note D) - Commitments: 1. The Company leases office space at six locations under noncancelable leases expiring on various dates through 1999. The Company's future minimum rental payments required under these leases are as follows: Year Ending December 31, 1995.....................................................$209,416 1996..................................................... 169,678 1997..................................................... 151,147 1998..................................................... 138,933 1999..................................................... 77,000 Total.................................................$746,174 Rent expense for the year ended December 31, 1994 aggregated $199,964. In addition, the Company is obligated for escalations for the Company's proportionate share of increases in real estate taxes and operating costs, on certain of these leases. 2. The Company entered into a consulting agreement with an entity owned by a former stockholder. This agreement provides for an aggregate of $195,000 to be paid to this entity in varying annual installments through December 31, 1997. As of December 31, 1994, the Company paid $95,000 under the terms of the agreement. The shares of the former stockholder have been placed in escrow as collateral under this agreement. (Note E) - Provision for Taxes: The provision for state and city income taxes consists of the following: Current..................................................$(22,200) Deferred................................................. 42,940 Total.................................................$ 20,740 - 7 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (Note E) - Provision for Taxes (Continued): The current provision includes New York City taxes calculated on an alternative method. For income tax purposes, the Company has net operating loss carryforwards aggregating $969,000 which are available to reduce future state taxable income, if any, through the year 2009. (Note F) - Treasury Stock: On December 23, 1994, the Company purchased 934 shares of its common stock from a former stockholder for $5,000. (Note G) - Major Customer: During 1994 the Company derived approximately 9% of gross revenue from one customer, pursuant to a contract to provide temporary employees. At December 31, 1994 approximately $402,000 is included in accounts receivable from this customer. - 8 - THE CONSORTIUM FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1993 THE CONSORTIUM INDEX TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1993 PAGE INDEPENDENT AUDITORS' REPORT........................................ 1 FINANCIAL STATEMENTS Balance Sheet.................................................... 2 Statement of Income and Retained Earnings........................ 3 Statement of Cash Flows.......................................... 4 Notes to Financial Statements....................................5 - 7 INDEPENDENT AUDITORS' REPORT To the Stockholders The Consortium Fairfield, New Jersey We have audited the accompanying balance sheet of The Consortium as of December 31, 1993, and the related statements of income and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the management of The Consortium. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Consortium as of December 31, 1993, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /S/ Citrin Cooperman CERTIFIED PUBLIC ACCOUNTANTS February 4, 1994 THE CONSORTIUM BALANCE SHEET DECEMBER 31, 1993
ASSETS (Note C) Current assets: Cash ...........................................................................................$ 22,122 Accounts receivable (less allowance for doubtful accounts of $25,000) (Note F)........................................................... 2,624,876 Prepaid expenses and other current assets........................................................... 125,504 Total current assets.......................................................................... 2,772,502 Furniture and equipment, net (Notes A(2) and B)........................................................ 44,497 Other assets (Note A(4))............................................................................... 98,904 TOTAL.........................................................................................$2,915,903 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft......................................................................................$ 374,908 Note payable - stockholders (Note C)................................................................ 420,000 Accounts payable and accrued expenses............................................................... 104,080 Accrued payroll..................................................................................... 336,163 Payroll and income taxes payable.................................................................... 48,555 Deferred taxes payable (Note A(3)).................................................................. 198,652 Total current liabilities.................................................................. 1,482,358 Commitments (Notes C and D) Stockholders' equity: Common stock - no par value; 10,300 shares authorized; 9,125 shares issued and outstanding.................................................................................. 900 Retained earnings................................................................................... 1,432,645 Total stockholders' equity................................................................. 1,433,545 TOTAL......................................................................................$2,915,903
The accompanying notes are an integral part of this statement. - 2 - THE CONSORTIUM STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1993
Gross revenue (Note F).................................................................................$19,817,464 Direct expenses........................................................................................ 16,909,298 Gross profit............................................................................... 2,908,166 General and administrative expenses.................................................................... 1,497,260 Officers' salaries..................................................................................... 1,092,417 Interest expense....................................................................................... 21,705 Income from operations................................................................................. 296,784 Interest income........................................................................................ 261 Income before provision for income taxes............................................................... 297,045 Provision for income taxes (Notes A(3) and E).......................................................... 100,613 NET INCOME............................................................................................. 196,432 Retained earnings - January 1, 1993.................................................................... 1,236,213 RETAINED EARNINGS - DECEMBER 31, 1993..................................................................$ 1,432,645
The accompanying notes are an integral part of this statement. - 3 - THE CONSORTIUM STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1993
Cash flows from operating activities: Net income..........................................................................................$ 196,432 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization................................................................. 35,065 Deferred taxes................................................................................ 69,600 Changes in operating assets and liabilities: (Increase) in accounts receivable................................................................ (839,399) (Increase) in prepaid expenses and other current assets.......................................... (105,314) Increase in cash overdraft....................................................................... 374,908 (Decrease) in accounts payable and accrued expenses.............................................. (142,822) Increase in accrued payroll...................................................................... 176,657 (Decrease) in payroll and income taxes payable................................................... (63,449) (Increase) in security deposits.................................................................. (4,756) Total adjustments............................................................................. (499,510) Net cash used in operating activities............................................................... (303,078) Cash flows from investing activities: Purchase of furniture and equipment................................................................. (32,292) Payment for restrictive covenant.................................................................... (48,000) Net cash used in investing activities............................................................... (80,292) Cash flows from financing activities: Repayment of bank borrowings........................................................................ (24,297) Proceeds of note payable from stockholders.......................................................... 420,000 Net cash provided by financing activities........................................................... 395,703 NET INCREASE IN CASH................................................................................... 12,333 Cash - January 1, 1993................................................................................. 9,789 CASH - DECEMBER 31, 1993...............................................................................$ 22,122 Supplemental cash flow information: Cash paid during year for: Interest.........................................................................................$ 21,705 Income taxes.....................................................................................$ 8,584
The accompanying notes are an integral part of this statement. - 4 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 (Note A) - Summary of Significant Accounting Policies: 1. Organization: The Consortium (the "Company") was incorporated under the laws of the State of New Jersey on May 19, 1975. The Company provides executive search, temporary employees, computer consultants and health care professionals to businesses and institutions primarily in New York and New Jersey. 2. Furniture and Equipment: Furniture and equipment are stated at cost. Depreciation and amortization are computed by the use of the Modified Accelerated Cost Recovery System (MACRS). Such depreciation and amortization does not differ materially from that which would have been recorded under generally accepted accounting principles. Expenditures for renewals and betterments which extend the originally estimated useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. 3. Income Taxes: The Company prepares its income tax returns using the cash basis method of accounting. Under this method, certain revenues are recognized when received rather than when earned and certain expenditures are recognized when paid rather than when incurred. Deferred taxes are provided for based upon the resulting temporary differences. The Company, with the consent of its shareholders has elected under the Internal Revenue Code and New York State Tax Law to be an S corporation. The shareholders of an S corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision for federal income taxes has been included in these financial statements. The provision for New York State income tax has been included to the extent the corporate tax rate exceeds the highest personal income tax rate. The Company is subject to New Jersey State and New York City income taxes. Effective January 1, 1993, the Company implemented the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which changed the criteria for measuring the provision for income taxes and recognizing deferred tax assets and liabilities on the balance sheet. Deferred taxes arise from temporary differences resulting from income and expense items reported for financial accounting and income tax purposes in different periods. SFAS No. 109 requires computing deferred income taxes under the liability method. The Statement requires that all deferred tax balances be determined by using the applicable tax rate expected to be in effect when the taxes will actually be paid or refunds received. The cumulative effect of implementing the provisions of SFAS No. 109 was immaterial. - 5- THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 (Note A) - Summary of Significant Accounting Policies (continued): 4. Restrictive Covenants: Restrictive covenants, arising from the acquisition of other companies during 1993 and 1992, are being amortized on the straight-line method over periods prescribed by the Internal Revenue Code. Such amortization does not differ materially from that which would have been recorded under generally accepted accounting principles. (Note B) - Furniture and Equipment: Furniture and equipment are summarized as follows: Estimated Useful Lives Furniture and equipment.............$270,059 5 to 7 years Leasehold improvements.............. 12,803 Life of lease ...... 282,862 Accumulated depreciation and amortization.................. 238,365 Total............................$ 44,497 Depreciation and amortization expense aggregated $16,199 for the year ended December 31, 1993. (Note C) - Related Party Transactions: Certain stockholders of the Company have entered into a loan agreement with a bank whereby the stockholders may borrow up to $1,000,000; the proceeds of which are to be used solely by the Company. The loan bears interest at the bank's base lending rate plus 1% per annum (6% at December 31, 1993). Borrowings under the agreement have been guaranteed by the stockholders, as well as cross-guaranteed by the Company. Interest expense paid on this loan aggregated $5,149 during 1993. Additionally, the Company has a line of credit with a commercial bank in the amount of $1,000,000. Under the terms of the agreement, outstanding borrowings are due on demand with interest payable monthly at the bank's base lending rate plus 1% per annum. The line is secured by the Company's eligible accounts receivable, and the remaining assets of the Company, and it is personally guaranteed by certain stockholders of the Company. There were no outstanding borrowings on this loan at December 31, 1993. - 6 - THE CONSORTIUM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 (Note D) - Commitments: The Company leases office space at six locations under noncancelable leases expiring on various dates through 1996. The Company's future minimum rental payments required under these leases are as follows: Year Ending December 31, 1994.....................................................$142,845 1995..................................................... 49,079 1996..................................................... 18,333 Total.................................................$210,257 Rent expense for the year ended December 31, 1993 aggregated $197,149. In addition, the Company is obligated for escalations for the Company's proportionate share of increases in real estate taxes and operating costs, on certain of these leases. (Note E) - Provision for Taxes: The provision for state and city income taxes consists of the following: Current..................................................$ 31,013 Deferred................................................. 69,600 Total.................................................$100,613 The current provision includes New York City taxes calculated on an alternative method. For income tax purposes, the Company has net operating loss carryforwards aggregating $501,000 which are available to reduce future state taxable income, if any, through the year 2008. (Note F) - Major Customer: During 1993 the Company derived approximately 9% of gross revenue from one customer, pursuant to a contract to provide temporary employees. At December 31, 1993 approximately $424,000 is included in accounts receivable from this customer. - 7 - Financial Statements and Exhibits Item 7 (b) Pro forma financial information UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined financial statements give effect to the acquisition of The Consortium (Consortium) by RCM Technologies, Inc. ("RCM") pursuant to a stock purchase transaction that was completed on March 11, 1996. This pro forma information has been prepared utilizing the historical financial statements of RCM and Consortium. This information should be read in conjunction with the historical financial statements and notes thereto of RCM which are incorporated by reference to RCM's Form 10-K and the historical financial statements of Consortium which is incorporated within this Form 8-K. The pro forma financial data is provided for comparative purposes only and does not purport to be indicative of the results which actually would have been obtained if the acquisition had been effected on the dates indicated or of the results which may be obtained in the future. The pro forma financial information is based on the purchase method of accounting for the acquisition. The pro forma adjustments are described in the accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet and Notes to Unaudited Pro Forma Condensed Combined Statement of Income. The Unaudited Pro Forma condensed combined statements of income for the year ended October 31, 1995 and the three months ended January 31, 1996 assume that the acquisition of Consortium had occurred on November 1, 1994 (combining the results for the year ended October 31, 1995, for RCM and the year ended December 31, 1995, for Consortium and combining the results for the three months ended January 31, 1996 for RCM and Consortium.) The unaudited pro forma condensed combined balance sheets at October 31, 1995 and January 31, 1996 assumes that the acquisition of Consortium had occurred on October 31, 1995 (combining the balance sheets for RCM and Consortium as of October 31, 1995, and December 31, 1995, respectively, and combining the balance sheets of RCM and Consortium as of January 31, 1996.) Acquisition The total purchase price for the shares acquired by the issuance of RCM Common Stock was valued at $5,000,000 plus estimated acquisition costs of approximately $500,000. The pro forma condensed combined financial statements have been prepared assuming the acquisition is effectuated by the issuance of 6,500,000 shares of RCM Common Stock ("Restricted Shares"). Assumptions Purchase Price Allocation Although neither RCM nor Consortium has complete information at this time as to the fair value of Consortium's individual assets and liabilities, an estimate of the eventual allocation of the purchase price was made on the basis of available information. The eventual allocation of the purchase price will be made on the basis of appraisals and valuations which give effect to various factors including the nature and intended future use of assets acquired in determining their value. It is not anticipated that any change in the allocation price will be material from the pro forma adjustments. For purpose of pro forma presentations, the excess purchase price over the net assets acquired is being amortized over an estimated life of forty (40) years. RCM TECHNOLOGIES, INC. AND THE CONSORTIUM UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OCTOBER 31, 1995
Historical Proforma RCM Technologies, Inc. The Consortium October 31, 1995 December 31, 1995 Adjustments Combined Assets: Cash and cash equivalents ............................... $ 297,550 $ 9,100 $ 306,650 Accounts and notes receivable ........................... 5,133,662 3,965,150 9,098,812 Prepaid expenses & other current assets ................. 671,662 246,282 917,944 Total current assets .................................... 6,102,874 4,220,532 10,323,406 Property and equipment-net .............................. 444,351 29,653 474,004 Intangible assets ....................................... 3,711,256 199,023 5,000,000 A 8,829,825 500,000 C (580,454)D Other Assets ............................................ 43,074 2,000 45,074 Total ................................................... $ 10,301,555 $ 4,451,208 $ 4,919,546 19,672,309 Liabilities and Shareholders' Equity: Notes payable ........................................... $ 914,435 $ 1,480,000 $ 2,394,435 1,100,000 B Other current liabilities ............................... 1,840,445 1,290,754 500,000 C 4,731,199 Total current liabilities ............................... 2,754,880 2,770,754 1,600,000 7,125,634 Long term obligations ................................... 20,090 20,090 (1,100,000)B (580,454)D Shareholders' equity .................................... 7,526,585 1,680,454 5,000,000 A 12,526,585 Total ................................................... $ 10,301,555 $ 4,451,208 $ 4,919,546 $ 19,672,309 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (A) to record issuance of 6.5 Million Shs of RCM Technologies, Inc. stock in exchange for all the shares of The Consortium ........ $5,000,000 (B) to record income tax liability upon termination of S-Corp. Income Tax Status ........................... $1,100,000 (C) to record estimated acquisition costs ......................... $ 500,000 (D) to eliminate shareholder's investment as follows: Purchase price ................................................. $5,000,000 Excess of purchase price over net assets acquired .............. 4,419,546 Shareholders' investment as reported ........................... $ 580,454
RCM TECHNOLOGIES, INC. AND THE CONSORTIUM UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME YEAR ENDED OCTOBER 31, 1995
Historical Pro Forma RCM Technologies, Inc The Consortium October 31, 1995 December 31, 1995 Adjustments Combined Revenues ............................ $ 26,915,737 $ 26,361,303 $ 53,277,040 Cost and expenses Cost of services .................. 22,378,817 19,913,106 42,291,923 Selling, general and administrative 3,549,810 6,324,697 (484,000)B 9,154,507 (86,000)C (150,000)D Interest expense .................. 38,158 82,360 120,518 Other, net ........................ (124,050) (198) (124,248) Depreciation and amortization ..... 130,397 49,081 122,989 A 302,467 Total ............................... 25,973,132 26,369,046 (597,011) 51,745,167 Income before income taxes .......... 942,605 (7,743) 597,011 1,531,873 Income taxes (benefit) .............. 93,500 (49,006) 288,000 E 217,294 (201,600)E 86,400 Net Income .......................... $ 849,105 $ 41,263 $510,611 $1,400,979 Net income per common share ......... $ 0.06 $ 45.85 $ 0.07 Average number of common shares outstanding ................ 15,039,847 900 21,539,847 NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME (A) to provide for amortization on excess purchase price over net assets acquired based an estimated life of 40 years .................... 122,989 (B) to reclassify S-Corp. earnings charged as descretionary salaries ......................................................... 484,000 (C) to remove expenses attributable to discontinued operations ....................................................... 86,000 (D) to reflect reduction of expenses attributable to consolidation of administrative overhead ........................ 150,000 (E) to provide Federal & State Income Taxes on The Consortium adjusted taxable income and utilization of RCM's N.O.L .......... 288,000 RCM' s ... N .O.L. Utilization (201,600) 86,400
RCM TECHNOLOGIES, INC. AND THE CONSORTIUM UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET January 31, 1996
Historical Pro Forma RCM Technologies, Inc The Consortium January 31, 1996 Janaury 31, 1996 Adjustments Combined Assets: Cash and cash equivalents ............................... $ 127,704 $ 127,704 Accounts and notes receivable ........................... 5,127,631 3,377,367 8,504,998 Prepaid expenses & other current assets ................. 753,518 173,851 927,369 Total current assets .................................... 6,008,853 3,551,218 9,560,071 Property and equipment-net .............................. 447,531 30,570 478,101 Intangible assets ....................................... 3,687,220 179,706 5,000,000 A 8,755,725 500,000 C (580,454)D (30,747)E Other Assets ............................................ 47,496 21,317 68,813 Total ................................................... $ 10,191,100 $ 3,782,811 $ 4,888,799 $18,862,710 Liabilities and Shareholders' Equity: Notes payable ........................................... 527,784 1,130,000 $ 1,657,784 (37,500)E 1,100,000 B Other current liabilities ............................... 1,634,430 936,929 500,000 C 4,133,859 Total current liabilities ............................... 2,162,214 2,066,929 1,562,500 5,791,643 6,753 E (1,100,000)B (580,454)D Shareholders' equity .................................... 8,028,886 1,715,882 5,000,000 A 13,071,067 Total ................................................... $ 10,191,100 $ 3,782,811 $ 4,888,799 $18,862,710 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (A) to record issuance of 6.5 Million Shs of RCM Technologies, Inc. stock in exchange for all the shares of The Consortium ........ $5,000,000 (B) to record income tax liability upon termination of S-Corp. Income Tax Status ........................... $1,100,000 (C) To record estimated acquisition costs ......................... $ 500,000 (D) to eliminate shareholder's investment as follows: Purchase price ................................................. $5,000,000 Excess of purchase price over net assets acquired .............. 4,419,546 Shareholders' investment as reported ........................... $ 580,454 (E) to record the effect of Pro Forma adjustments resulting from the statement of income for the Three Months Ended January 31, 1996 ....................................... $ 6,753
RCM TECHNOLOGIES, INC. AND THE CONSORTIUM UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME THREE MONTHS ENDED JANUARY 31, 1996
Historical Pro Forma RCM Technologies, Inc The Consortium January 31, 1996 January 31, 1996 Adjustments Combined Revenues ............................ $ 9,776,507 $ 6,214,604 $15,991,111 Cost and expenses Cost of services .................. 7,985,878 4,489,504 12,475,382 Selling, general and administrative 1,144,116 1,588,748 (37,500)B 2,695,364 Interest expense .................. 24,901 20,590 45,491 Other, net ........................ 6,030 6,030 Depreciation and amortization ..... 54,970 12,270 30,747 A 97,987 Total ............................... 9,215,895 6,111,112 (6,753) 15,320,254 Income before income taxes .......... 560,612 103,492 6,753 670,857 Income taxes ........................ 58,749 10,349 47,937 C 69,098 (47,937)C Net Income .......................... $ 501,863 $ 93,143 $ 6,753 $ 601,759 Net income per common share ......... $ 0.03 $ 103.49 $ 0.03 Average number of common shares outstanding ................ 16,383,133 900 22,883,133 NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME (A) to provide for amortization on excess purchase price over net assets acquired based an estimated life of 40 years ...................... 30,747 (B) to reflect reduction of expenses attributable to consolidation of administrative overhead ......................... 37,500 (C) to provide Federal Taxes on The Consortium adjusted taxable income and utilization of RCM's N.O.L............ 47,937 RCM's N.O.L. Utilization ................................... (47,937)
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RCM Technologies, Inc. By: /S/ Stanton Remer Stanton Remer Chief Financial Officer, Treasurer and Director Date: March 19, 1996 EX-2 2 STOCK PURCHASE AGREEMENT \PHILA2\100322_5 STOCK PURCHASE AGREEMENT AMONG RCM TECHNOLOGIES, INC. THE CONSORTIUM AND THE SHAREHOLDERS OF THE CONSORTIUM Dated as of March 1, 1996 \PHILA2\100322_5
TABLE OF CONTENTS Page 1. DEFINITIONS................................................................................... 1 2. PURCHASE AND SALE OF SHARES OF ACQUIREE....................................................... 3 3.A. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND MESSRS. BLAIRE AND MEYERS...................................................................................... 5 3.B. REPRESENTATIONS AND WARRANTIES OF MINORITY SHAREHOLDERS........................................................................................... 14 4. REPRESENTATIONS AND WARRANTIES OF RCM......................................................... 16 5. COVENANTS OF THE PARTIES...................................................................... 23 6. THE CLOSING................................................................................... 28 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND ACQUIREE SHAREHOLDERS.................................................................................. 31 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM.................................................... 33 9. INDEMNIFICATION........................................................................................ 37 10. TERMINATION............................................................................................ 39 11. NOTICES....................................................................................... 39 12. ARBITRATION................................................................................... 41 13. MISCELLANEOUS................................................................................. 41
\PHILA2\100322_5 LIST OF SCHEDULES 3.A.2(a) Audited Financial Statements for the fiscal years ended December 31, 1995, 1994 and 1993 3.A.3 Undisclosed Liabilities of Acquiree 3.A.5 Accounts Receivable of Acquiree as of December 31, 1995 3.A.6 Material adverse changes 3.A.7 Litigation 3.A.9 Articles of Incorporation, Bylaws and Contracts of Acquiree 3.A.10 Tax information 3.A.11 All material Contracts and Agreements of Acquiree 3.A.12 Liens, encumbrances and general description of all real property in which Acquiree has an ownership interest 3.A.13 Licenses, trademarks and trade names of Acquiree 3.A.14 Consents to be obtained by Acquiree 3.A.15 Capitalization of Acquiree 3.A.18 Messrs. Blaire and Meyers' Obligation 3.A.19 Approvals required to be obtained by Acquiree Shareholders 3.A.20 Number and names of employees and compensation of all directors and officers of Acquiree - identifies all employee benefit plans 3.A.21 Compliance with environmental and conservation laws 3.A.22 List of all insurance policies of Acquiree 3.A.23 List of all bank accounts maintained or for the benefit of Acquiree 3.A.24 List of 10 largest customers of Acquiree, based on dollar volume of income for Fiscal 1995 4.1 Articles of Incorporation and Bylaws of RCM 4.3 Capitalization of RCM 4.4 Undisclosed Liabilities of RCM \PHILA2\100322_5 4.5 Subsidiaries of RCM 4.6 Material adverse changes 4.7 Litigation 4.9 Tax Information 4.10 Title to Property and Related Matters 4.11 Licenses, trademarks and trade names of RCM 4.12 Number and names of employees and compensation of all directors and officers of RCM - identifies all employee benefit plans 4.13 Compliance with environmental and conservation laws 4.14 List of all insurance policies of RCM 4.15 List of all bank accounts maintained or for the benefit of RCM 4.16 List of 10 largest customers of RCM, based on dollar volume of income for the fiscal year ended September 30, 1995 4.17 Consents to be obtained by RCM 4.21 All material Contracts and Agreements of RCM \PHILA2\100322_5 LIST OF EXHIBITS Exhibit "A" Escrow Agreement Exhibit "B" Registration Rights Agreement Exhibit "C" Standstill and Shareholders' Agreement Exhibit "D" Blaire Employment Agreement Exhibit "E" Meyers Employment Agreement Exhibit "F" Investor Representation Letter \PHILA2\100322_5 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement" ) is made and entered into as of this 1st day of March 1996, by and among RCM Technologies, Inc., a Nevada corporation ("RCM"); The Consortium, a New Jersey corporation (the "Acquiree"); and those shareholders of Acquiree identified in Section 1 of this Agreement (the "Acquiree Shareholders"). RECITALS: WHEREAS, the Acquiree Shareholders own in the aggregate one hundred percent (100%) of the issued and outstanding common stock of the Acquiree (the "Acquiree Shares"); and WHEREAS, the Acquiree Shareholders desire to sell the Acquiree Shares and RCM desires to purchase the Acquiree Shares, each upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS. (a) The foregoing RECITALS are true and correct, and are incorporated herein and made a part hereof. (b) For purposes of this Agreement, the terms set forth below shall have the following meanings: Acquiree.............................................................. The Consortium, a New Jersey corporation Acquiree............................................................ Shareholders Those individuals consisting of Martin Blaire, Barry Meyers, Howard Ross, Marie Wolfson and Alexander Valcic, who in the aggregate own 100% of the outstanding capital stock of The Consortium. Blaire and Meyers................................................ Martin Blaire and Barry Meyers, individuals who in the aggregate own 10,212 shares (93.4%) of Acquiree. Code.......................................................... The Internal Revenue Code of 1986, as amended. Closing...................................................... The transaction of events set forth in Section 6 hereof. 1 \PHILA2\100322_5 Closing Date................................................. The day on which the Closing is held as set forth in Section 6 hereof. Closing....................................................... Financial Statements Unaudited financial statements of the Acquiree for the interim period from January 1, 1996 through the Closing Date. Escrow Shares................................................. The portion of the RCM Shares delivered to escrow pursuant to Section 2.4. Excess Tax................................................. Liability That amount of tax liability calculated in accordance with Section 2.3. Exchange Act.............................................. The Securities Exchange Act of 1934, as amended. Financial.............................................. Statements Audited financial statements of the Acquiree for the fiscal years ended December 31, 1995, December 31, 1994, and December 31, 1993 prepared in compliance with the requirements of generally accepted accounting principles. Interim Financial................................... Statements Unaudited financial statements of the Acquiree for the interim period from January 1, 1996 through January 31, 1996. Minority......................................... Shareholders Those individuals consisting of Howard Ross, Marie Wolfson and Alexander Valcic, who in the aggregate own 715 shares (6.6%) of the outstanding capital stock of Acquiree. RCM Shares..................................... 6.5 million shares of RCM Common Stock to be issued to the Acquiree Shareholders pursuant to the terms of this Stock Purchase Agreement, subject to adjustments as provided herein. RCM................................................... RCM Technologies, Inc., a Nevada corporation. RCM Common Stock...................................... Common stock, $.05 par value per share, of RCM. 2 \PHILA2\100322_5 S Revocation Date............................................. The date upon which the revocation of the S Corporation status of Acquiree is deemed effective for federal tax purposes. SEC........................................................ The Securities and Exchange Commission. Securities Act............................................. The Securities Act of 1933, as amended. 2. PURCHASE AND SALE OF SHARES OF ACQUIREE. 2.1 Purchase and Sale of Shares of Acquiree. Subject to the terms and conditions of this Agreement, on the Closing Date, the Acquiree Shareholders will sell, convey, assign, transfer and deliver the Acquiree Shares to RCM, and RCM shall purchase, acquire and accept from the Acquiree Shareholders the Acquiree Shares, which shall constitute one hundred percent (100%) of the outstanding capital stock of Acquiree. 2.2 Purchase Consideration. (a) On the Closing Date, (i) Acquiree Shareholders shall deliver to RCM certificates representing the Acquiree Shares; and (ii) RCM shall cause to be issued certificates in the name of each of the Acquiree Shareholders in amounts as set forth in Schedule 2.2(a) representing, in the aggregate, 6.5 million shares of RCM's Common Stock (the "RCM Shares"), of which Messrs. Blaire and Meyers shall deliver into escrow an aggregate 1.625 million shares of RCM's Common Stock pursuant to Section 2.4 ("Escrow Shares"). (b) The RCM Shares shall be divided among the Acquiree Shareholders in the same proportion as they own the Acquiree Shares. No other consideration shall be payable to the Acquiree Shareholders in connection with this Agreement. 2.3 Long-Term Contingency Regarding Federal Income Taxes. (a) The Acquiree, Acquiree Shareholders and RCM agree and acknowledge that the number of RCM Shares to be paid to the Acquiree Shareholders has been determined based upon the assumption that the tax liability incurred by Acquiree prior to Closing associated with the recognition of income resulting from the change in accounting method of Acquiree from cash to accrual prior to Closing will be $1.1 million. (b) The number of RCM Shares shall be reduced (as set forth in this subsection (b)) by the amount by which RCM's aggregate federal and state tax liability associated with the change in accounting method of Acquiree from cash to accrual as 3 \PHILA2\100322_5 paid out over each of the tax periods up to and including October 31, 1998, exceeds $1.1 million (the "Excess Tax Liability"). If there is no Excess Tax Liability, there shall be no adjustment to the RCM Shares. Within 30 days after the date the federal tax returns for RCM for the fiscal year ended October 31, 1998 are filed, RCM shall send a notice (the "Notice") to the Acquiree Shareholders providing in reasonable detail its calculation of the Excess Tax Liability. Acquiree Shareholders shall have 30 days following such Notice in which to review the calculation of the Excess Tax Liability and to notify RCM if it disputes the amount thereof ("Dispute Notice"). In the event Acquiree Shareholders do not provide the Dispute Notice timely, it shall be assumed that they consent to the calculation of the Excess Tax Liability. If the Dispute Notice is provided timely, and the parties are unable to resolve such dispute within 30 days of RCM's receipt of such Dispute Notice, then such dispute shall be handled in accordance with the provisions of Section 12 hereafter. (c) The Acquiree Shareholders shall have the option to pay to RCM in cash an amount equal to the Excess Tax Liability no less than 45 days after its receipt of the Notice. If the Acquiree Shareholders do not pay the Excess Tax Liability in cash prior to such 45th day, then the number of RCM Shares shall be reduced by cancellation of a sufficient number of Escrow Shares as shall have a value equal to the Excess Tax Liability, in accordance with the Escrow Agreement (as defined in Section 2.4 of this Agreement) and the balance of the Escrow Shares held in Escrow to secure such Excess Tax Liability shall be released from Escrow and returned to the Acquiree Shareholders. For purposes of this Agreement, the term "value" shall be determined by the average closing price of RCM Common Stock either on The NASDAQ Stock Market or other principal exchange upon which RCM Common Stock is regularly traded, for the 20 trading days immediately preceding the date the Acquiree Shareholders determine the form of payment of the Excess Tax Liability under this subparagraph (c). 2.4 Escrow Agreement. Messrs. Blaire and Meyers shall deposit in escrow the Escrow Shares immediately upon issuance to Messrs. Blaire and Meyers pursuant to an escrow agreement in the form of Exhibit "A" attached hereto and made a part hereof (the "Escrow Agreement"). The Escrow Shares shall be deemed collateral to ensure payment of the Excess Tax Liability as provided in Section 2.3 and for the indemnification obligations of Messrs. Blaire and Meyers pursuant to Section 10 of this Agreement. 3.A. REPRESENTATIONS AND WARRANTIES OF ACQUIREE AND MESSRS. BLAIRE AND MEYERS. The Acquiree and Messrs. Blaire and Meyers, jointly and severally, as a material inducement to RCM to enter into this Agreement and consummate the transactions contemplated hereby, make the following representations and warranties to RCM which representations and warranties are true and correct in all material respects at this date, and will be true and correct in all 4 \PHILA2\100322_5 material respects on the Closing Date as though made on and as of such date. 3.A.1 Shareholders of Acquiree. The Acquiree Shareholders are, and will be on the Closing Date, the sole owners, of record and beneficially, of all the issued and outstanding shares of the Acquiree's capital stock. Acquiree does not own more than 5% percent of the issued and outstanding capital stock of any other corporation or an equity interest in any other entity. 3.A.2 Financial Statements. (a) The Audited Financial Statements for the fiscal years ended December 31, 1994 and 1993 ("1994 and 1993 Financial Statements") have been attached as Schedule 3.A.2(a). The 1994 and 1993 Financial Statements and the financial information contained therein present fairly the financial condition of the Acquiree for the periods covered and have been prepared in accordance with generally accepted accounting principles, consistently applied. (b) The Audited Financial Statements for the fiscal year ended December 31, 1995 ("1995 Financial Statements") will be delivered to RCM at or prior to Closing. The 1995 Financial Statements and the financial information contained therein will present fairly the financial condition of the Acquiree for the periods covered and will be prepared in accordance with generally accepted accounting principles, consistently applied. (c) The Interim Financial Statements and Closing Financial Statements will be prepared on an unaudited basis and delivered to RCM at or prior to Closing and within 60 days of Closing, respectively. The Interim Financial Statements and Closing Financial Statements and the financial information contained therein will present fairly the financial condition of the Acquiree for the interim periods covered and will be prepared in accordance with generally accepted accounting principles, consistently applied. (d) The books and records of Acquiree, financial and other, are in all material respects complete and correct and have been maintained in accordance with good business and accounting practices. 3.A.3 Undisclosed Liabilities. Acquiree does not have any liabilities or obligations of any nature, fixed or contingent, that will not be shown or otherwise provided for in the Financial Statements, except (a) as set forth on Schedule 3.A.3, (b) for any tax liabilities incurred in connection with Acquiree's conversion from an S Corporation to a C Corporation prior to 5 \PHILA2\100322_5 Closing and the related change from the cash method to the accrual method of accounting for federal income tax purposes, and (c) for liabilities and obligations arising subsequent to the date of the Financial Statements in the ordinary course of business, none of such liabilities referred to in this clause (c) will individually or in the aggregate be materially adverse to the business or financial condition of the Acquiree. There are no material loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5 of the Financial Accounting Standards Board) of the Acquiree that will not be adequately provided for. 3.A.4 RCM Shares to Constitute Restricted Securities. Messrs Blaire and Meyers represent and warrant: (a) that they have reviewed the quarterly, annual and periodic reports of RCM, as filed by RCM with the SEC pursuant to the Exchange Act, and that they have such knowledge and experience in financial and business matters that they are capable of utilizing the information set forth therein concerning RCM to evaluate the risks of investing in the RCM Shares; (b) that they have been advised that the RCM Shares to be issued to them by RCM constitute "restricted securities" as defined in Rule 144 promulgated under the Securities Act, and accordingly, have not been and will not be registered under the Securities Act except as otherwise set forth in this Agreement, and, therefore, they may not be able to sell or otherwise dispose of such RCM Shares except if the RCM Shares are subject to an effective registration statement filed with the SEC, in compliance with Rule 144 or otherwise pursuant to an exemption from registration under the Securities Act; (c) that the RCM Shares so issued are being acquired by them for their own benefit and on their own behalf for investment purposes and not with a view to, or for resale in connection with, a public offering or re-distribution thereof; (d) that the RCM Shares so issued will not be resold (i) without registration thereof under the Securities Act (unless in the opinion of counsel acceptable to RCM, an exemption from such registration is available) or (ii) in violation of any law; and (e) that the certificate or certificates representing the RCM Shares to be issued will be imprinted with a legend in form and substance as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." and RCM is hereby authorized to notify its transfer agent of the status of the Shares, and to take such other action including, but not limited to, the placing of a "Stop Transfer" order on the books 6 \PHILA2\100322_5 and records of RCM's transfer agent to insure compliance with the foregoing. 3.A.5 Accounts Receivable. Attached hereto as Schedule 3.A.5 is a list of all accounts receivable of Acquiree as of December 31, 1995 and aging schedule pertaining thereto. All of the accounts receivable of Acquiree now and on the Closing Date, are bona fide accounts receivable of Acquiree representing the sales price of (or other sums or fees receivable for or in respect of) goods, merchandise, or services sold or performed by Acquiree in valid transactions in the regular course of its business to or for the benefit of its customers. Such accounts receivable, subject to reserves, if any, established within the Financial Statements, are not uncollectible or subject to offset or counterclaim or otherwise in controversy. 3.A.6 Material Adverse Changes. Except as specifically stated in Schedule 3.A.6 or as contemplated or required by this Agreement, from December 31, 1995 to the date of this Agreement, the business of the Acquiree has been operated in the ordinary course and there has not been: (a) Any materially adverse changes in the business, condition (financial or otherwise), results of operations, properties, assets, liabilities, earnings or net worth of the Acquiree for such period or at any time during such period; (b) Any material damage, destruction or loss (whether or not covered by insurance) affecting the Acquiree or its assets, properties or business; (c) Any cancellation or material breaches on any existing contract of which Acquiree is a party that would have a material adverse effect on the business of Acquiree; (d) To the knowledge of Acquiree and Acquiree Shareholders, any statute, rule, regulation or order adopted by any governmental body, agency or authority that materially and adversely affects the Acquiree or its business or financial condition; (f) Any payment of bonuses or accrued salaries out of the ordinary course of business or agreements to materially increase the rate or terms of compensation payable or to become payable by Acquiree to its directors, officers or key employees; provided, however, that this subsection shall not restrict or limit the Acquiree in any way from hiring additional personnel who are required for its operations; or (g) To the knowledge of Acquiree and Acquiree Shareholders, any other events or conditions of any character that 7 \PHILA2\100322_5 may reasonably be expected to have a materially adverse effect on the Acquiree or its business or financial condition. 3.A.7 Litigation. To the knowledge of Acquiree and Acquiree Shareholders, except as set forth in Schedule 3.A.7, there are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending or threatened against the Acquiree, whether at law or in equity, or before or by any federal, state, municipal, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, nor does the Acquiree or the Acquiree Shareholders know of any basis for any such action, suit, claim, investigation or proceeding. 3.A.8 Compliance: Governmental Authorizations. The Acquiree has complied in all material respects with all federal, state, local or foreign laws, ordinances, regulations and orders applicable to its business, including without limitation, federal and state securities, banking collection and consumer protection laws and regulations that, if not complied with, would materially and adversely affect its businesses. The Acquiree has all federal, state, local and foreign governmental licenses and permits necessary for the conduct of its business. Such licenses and permits are in full force and effect. Neither the Acquiree nor the Acquiree Shareholders knows of any violations of any such licenses or permits. To the knowledge of Acquiree and Messrs. Blaire and Meyers, no proceedings are pending or threatened to revoke or limit the use of such licenses or permits that would have an adverse effect on the business of Acquiree. 3.A.9 Due Organization. The Acquiree is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey; it is qualified to do business and in good standing in each state where its properties are owned, leased or operated, or the business conducted, by them require such qualification except where failure to so qualify would not have a material adverse effect on its financial condition, properties, business or results of operations. The Acquiree has the power to own its properties and assets and to carry on its business as now presently conducted. True and complete copies of the Articles of Incorporation and Bylaws of Acquiree, including any amendments thereto, have been attached as Schedule 3.A.9. 3.A.10 Taxes. Except as disclosed on Schedule 3.A.10, all (a) federal, state, local or foreign tax returns (collectively, the "Returns") required to be filed with respect to the properties, assets, operations, income and net worth of Acquiree have been timely filed or appropriate extensions have been obtained and such Returns are true, correct and complete; and (b) taxes and governmental charges, including, without limitation, any interest and penalties (collectively, "Taxes") due pursuant to such Returns have been paid or adequate provision therefore has been made on the 8 \PHILA2\100322_5 Financial Statements. Except as disclosed on Schedule 3.A.10, there are no outstanding agreements or waivers extending the statutory period of limitation concerning any tax liability of Acquiree, no examination of any Return of Acquiree is currently in progress and no governmental authority has, within the last three (3) years, notified Acquiree or Acquiree Shareholders of any tax claim, investigation or proceeding. All monies required to be collected or withheld by the Acquiree for income taxes, social security and other payroll taxes related to its occupational or physical therapy personnel have been collected or withheld, and either paid to the appropriate governmental agencies, set aside in accounts for such purpose, or accrued, reserved against and entered upon the books of the Acquiree and the Acquiree is not liable for any taxes or penalties for failure to comply with any of the foregoing in connection with any of its occupational or physical therapy personnel. With respect to the Acquiree's computer programmers, system analysts and consultants (the "Programmers"), the Acquiree has evaluated and classified the Programmers as independent contractors or employees in accordance with the National Association of Computer Consulting Businesses ("NACCB") guidelines and have entered into independent contractor agreements on forms approved by the NACCB with the Programmers treated as independent contractors. Acquiree has maintained, monitored and continues to maintain and monitor the Programmers who are independent contractors and their agreements to assure compliance with the NACCB guidelines. To the knowledge of Messrs Blaire and Meyers, the Acquiree is eligible to receive any funds available under the NACCB legal defense programs for compliance with its guidelines on independent contractors. The Acquiree is not and will not be liable for any taxes imposed under Code Sections 1374 or 1375 and has been an S Corporation for federal income tax purposes since May 1, 1987 to the S Revocation Date. Acquiree will be responsible for filing the short period S return ending on the S Revocation Date and the filing for the one day C Corporation period, which returns shall be reported on the closing of the books method as set forth in Code Section 1362(e)(3) and the Acquiree shall comply with all the necessary requirements for making such election. Set forth on Schedule 3.A.10 is a list of all elections which have a material effect on the calculation of Taxes payable or with respect to the income, deductions, credits, allowances or assets of the Acquiree, except those elections pertaining to the revocation of the S Corporation status of Acquiree prior to Closing and the election to change from the cash to accrual method of accounting. The Acquiree has not made, is not obligated to make, and will not, as a result of the transactions contemplated hereby, make or become obligated to make any "excess parachute payment" within the meaning of Section 280G of the Code (determined without regard to subsection (b)(4) thereof). 3.A.11 Agreements. Schedule 3.A.11 contains a true and complete list of all material contracts, agreements, mortgages, obligations, arrangements, restrictions and other instruments to 9 \PHILA2\100322_5 which the Acquiree is a party or by which the Acquiree or its assets may be bound. True and correct copies of all items set forth on Schedule 3.A.11 have been or will have been made available to RCM prior to the date hereof. No event has occurred that (whether with or without notice or lapse of time) would constitute a material default by the Acquiree under any of the contracts or agreements set forth in Schedule 3.A.11. Neither the Acquiree nor any of the Acquiree Shareholders have knowledge of any material default by the other parties to such contracts or agreements. 3.A.12 Title to Property and Related Matters. The Acquiree has, and at the time of the Closing Date will have, good and marketable title to all of its properties, interests in properties and assets, real, personal and mixed, owned by it at the date of this Agreement or acquired by it after the date of this Agreement, of any kind or character, free and clear of any liens or encumbrances, except (i) those set forth in Schedule 3.A.12, and (ii) liens for current taxes not yet delinquent. Schedule 3.A.12 also contains a general description of all real property in which Acquiree has an ownership interest. Except as set forth in said Schedule 3.A.12 and except for matters that may arise in the ordinary course of business, the assets of the Acquiree are in good operating condition and repair, reasonable wear and tear excepted. There does not exist any condition that materially interferes with the use thereof in the ordinary course of the business of the Acquiree. 3.A.13 Licenses; Trademarks: Trade Names. Except as set forth on Schedule 3.A.13, the Acquiree does not have, nor does it own or use in its business any licenses, trademarks, trade names, service marks, copyrights, patents or any applications for any of the foregoing that relate to its business. 3.A.14 Due Authorization. This Agreement has been duly authorized, executed and delivered by the Acquiree and constitutes a valid and binding agreement of the Acquiree, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting or affecting the enforcement of creditors rights generally or by the application of equitable principles. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance with any of the provisions hereof, will violate in any material respect any order, writ, injunction or decree of any court or governmental authority, or violate or conflict with in any material respect or constitute a default under (or give rise to any right of termination, cancellation or acceleration under), any provisions of the Acquiree's Articles of Incorporation or Bylaws, the terms or conditions or provisions of any note, bond, lease, mortgage, obligation, agreement, arrangement or restriction of any kind to which the Acquiree is a party or by which the Acquiree or its 10 \PHILA2\100322_5 properties may be bound, or violate in any material respect any statute, law, rule or regulation applicable to the Acquiree, except that the consents disclosed on Schedule 3.A.14 will be required pursuant to the terms of those scheduled agreements. No consent or approval by any governmental authority is required in connection with the execution and delivery by the Acquiree of this Agreement or the consummation of the transactions contemplated hereby. 3.A.15 Capitalization. The authorized capitalization of the Acquiree consists of 100,000 shares of $1.00 par value Common Stock of which 10,927 shares are issued and outstanding as of the date of this Agreement; the Acquiree Shares have been duly authorized, validly issued, and are fully paid and non-assessable, and were issued in compliance with applicable federal and state securities laws and regulations. Except as set forth on Schedule 3.A.15, there are no outstanding or presently authorized securities, warrants, preemptive rights, subscription rights, options or related commitments or agreements of any nature to issue any of the Acquiree's securities. Schedule 3.A.15 sets forth the share ownership and respective percentage of the outstanding shares of Acquiree. 3.A.16 Brokerage Fees. Except for Acquest International, L.P., whose fees shall be paid by RCM, the Acquiree has not incurred, and will not incur, any liability for brokerage or finder's fees or similar charges in connection with the transactions contained within this Agreement. 3.A.17 Share Ownership. The Acquiree Shares to be surrendered at the Closing by Messrs. Blaire and Meyers will be owned of record and beneficially by Messrs. Blaire and Meyers, free and clear of all liens and encumbrances of any kind and nature. There are no agreements (other than this Agreement) to sell, pledge, assign or otherwise transfer such securities. 3.A.18 Messrs. Blaire and Meyers' Obligation. This Agreement constitutes the valid and legally binding obligation of Messrs. Blaire and Meyers. Except as set forth on Schedule 3.A.18, 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 Messrs. Blaire and Meyers or any contract, commitment, agreement or restriction of any kind to which either of Messrs. Blaire and Meyers are a party or by which either of Messrs. Blaire and Meyers are bound. 3.A.19 Approvals Required. Except as set forth on Schedule 3.A.19 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 11 \PHILA2\100322_5 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 either of Messrs. Blaire and Meyers 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.A.20 Employee; Benefit Plans. (a) Schedule 3.A.20 sets forth the number and names of the employees of Acquiree and the total 1995 compensation of each of the directors, officers and employees of Acquiree. (b) Acquiree does not have any "employee benefit plans" (as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")). Schedule 3.A.20 identifies all programs, including, without limitation, any pension plans, health and welfare plans, life, disability, medical, dental or hospitalization insurance plans, sick-leave, vacation accrual or holiday plans, bonus, savings, profit-sharing or other similar benefit plans, deferred compensation, stock option, stock ownership and stock purchase plans covering employees or former employees of Acquiree. Except as disclosed on Schedule 3.A.20, each such plan or program has been operated substantially in accordance with its terms and, to the extent applicable, ERISA and the Code. Acquiree does not sponsor or contribute to, nor have they ever sponsored or been required to contribute to, any "multiemployer plan" as such term is defined in Section 3(37) of ERISA. (c) Except as disclosed on Schedule 3.A.20, Acquiree does not have any written contracts, or oral contracts, including any employment, management, agency or consulting contracts, with respect to any of its current or retired employees. (d) Except as disclosed on Schedule 3.A.20, Acquiree is not a party to any collective bargaining agreement and there are no union organizational activities or efforts to effect a representation election pending or threatened. (e) Except as disclosed on Schedule 3.A.20, Acquiree has complied in all material respects with all applicable laws relating to the employment of labor, including the provisions thereof relating to benefits required to be provided under Part VI of Subtitle B of Title I of ERISA or Section 4980B(f) of the Code (collectively, "COBRA"), wages, hours, working additions, employee benefit plans and the payment of withholding and social security taxes. 12 \PHILA2\100322_5 3.A.21 Environmental Matters. Except as set forth in Schedule 3.A.21 Acquiree is in compliance with all laws, rules and regulations relating to environmental protection and conservation (including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act and the Superfund Amendments and Reauthorization Act of 1986, as amended and all applicable state laws pertaining to the environment), and neither Acquiree or Acquiree Shareholders have received any notification of any asserted present or past failure to so comply with such laws, rules or regulations. Acquiree has obtained and is in compliance with all permits, licenses and other authorizations required under federal, state and local laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials or wastes into ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials or wastes (collectively "Environmental Requirements"). Neither Acquiree or Acquiree Shareholders is aware of, nor have Acquiree or Acquiree Shareholders received notice of, any circumstances which may interfere with or prevent continued compliance, or which may give rise to any liability, or otherwise form the basis of any claim, or investigation under Environmental Requirements, relating to the operation of Acquiree's business. For the purpose of this Section, "hazardous substances" shall include (1) hazardous substances as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and regulations thereunder and, (2) any substance for which state or local laws require the clean-up, removal or other special handling of such materials or imposing liability based upon improper handling thereof. 3.A.22 Insurance. Schedule 3.A.22 contains a list of all policies of liability, environmental, crime, fidelity, life, fire, workers' compensation, health, director and officer liability and all other forms of insurance currently in effect and owned or held by Acquiree, and identifies for each such policy, to the extent such information is reasonably available to Acquiree, the underwriter, policy number, coverage type, premium, expiration date and deductible. All of the insurance policies listed on Schedule 3.A.22 are outstanding and in full force and effect and all premiums required to be paid with respect to such policies are currently paid, provided however, Acquiree shall be permitted to transfer such "key man" insurance obtained for Messrs. Blaire and Meyers to the individual policies of Messrs. Blaire and Meyers. 3.A.23 Bank Accounts. Schedule 3.A.23 contains a list of all bank accounts maintained by, or for the benefit of, Acquiree. 13 \PHILA2\100322_5 3.A.24 Customers. Set forth on Schedule 3.A.24 is a list of the ten (10) largest customers of Acquiree based on the dollar volume of income generated by that customer for Fiscal 1995. No such customer has terminated or, to Acquiree's knowledge, is presently threatening to terminate its relationship with Acquiree. 3.A.25 Prepayment Penalties. There are no prepayment penalties or fines associated with the outstanding long-term debt or lines of credit of Acquiree. If any such prepayment penalties or fines occur, Messrs. Blaire and Meyers shall be liable for the payment of such penalties or fines. 3.A.26 Approval. The Board of Directors of the Acquiree have approved the execution of this Agreement and the transactions contemplated thereby. 3.B. REPRESENTATIONS AND WARRANTIES OF MINORITY SHAREHOLDERS. Each of the Minority Shareholders as a material inducement to RCM to enter into this Agreement and consummate the transactions contemplated hereby, make the following representations and warranties to RCM which representations and warranties are true and correct in all material respects at this date, and will be true and correct in all material respects on the Closing Date as though made on and as of such date. 3.B.1 RCM Shares to Constitute Restricted Securities. The Minority Shareholders represent and warrant: (a) that they have reviewed the quarterly, annual and periodic reports of RCM, as filed by RCM with the SEC pursuant to the Exchange Act, and that they have such knowledge and experience in financial and business matters that they are capable of utilizing the information set forth therein concerning RCM to evaluate the risks of investing in the RCM Shares; (b) that they have been advised that the RCM Shares to be issued to them by RCM constitute "restricted securities" as defined in Rule 144 promulgated under the Securities Act, and accordingly, have not been and will not be registered under the Securities Act except as otherwise set forth in this Agreement, and, therefore, they may not be able to sell or otherwise dispose of such RCM Shares except if the RCM Shares are subject to an effective registration statement filed with the SEC, in compliance with Rule 144 or otherwise pursuant to an exemption from registration under the Securities Act; (c) that the RCM Shares so issued are being acquired by them for their own benefit and on their own behalf for investment purposes and not with a view to, or for resale in connection with, a public offering or re-distribution thereof; (d) that the RCM Shares so issued will not be resold (i) without registration thereof under the Securities Act (unless in the opinion of counsel acceptable to RCM, an exemption from such registration is available), (ii) in violation of any law; and (e) that the certificate or certificates representing the RCM Shares to be issued will be imprinted with a legend in form and substance as follows: 14 \PHILA2\100322_5 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." and RCM is hereby authorized to notify its transfer agent of the status of the Shares, and to take such other action including, but not limited to, the placing of a "Stop Transfer" order on the books and records of RCM's transfer agent to insure compliance with the foregoing. 3.B.2 Share Ownership. The Acquiree Shares to be surrendered by the Minority Shareholders at the Closing will be owned of record and beneficially, by the Minority 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.B.3 Acquiree Shareholders' Obligation. The Agreements made by them herein constitute a valid and legally binding obligation on each of the Minority Shareholders. 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 Minority Shareholders or any contract, commitment, agreement or restriction of any kind to which any of the Minority Shareholders are a party or by which any of the Minority Shareholders are bound. 3.B.4 Approvals Required. Except 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 Minority Shareholders of this Agreement or the consummation by them of the transactions described herein, except to the extent that any of the Minority 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. 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 15 \PHILA2\100322_5 respects at this date, and will be true and correct in all material respects on the Closing Date as though made on and as of such date. 4.1 Due Organization of RCM. RCM is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, is qualified to 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 the financial condition, properties, business or results of operations of RCM. RCM has the corporate power and authority to own its property and assets and to carry on its business as now presently conducted. True, correct and complete copies of the Articles of Incorporation and By-Laws of RCM, including any amendments thereto, are attached hereto as Schedule 4.1. 4.2 SEC Reports. RCM has heretofore delivered to Acquiree and Acquiree Shareholders copies of its Annual Reports on Form 10-K for the fiscal years ended October 31, 1995, 1994 and 1993 and all quarterly reports for those fiscal years (the "RCM Reports"). As of their date of filing, the RCM Reports did not contain any untrue statements of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. Furthermore, except as otherwise disclosed in such RCM Reports, RCM has experienced no material adverse change in its financial condition, properties, business or prospects since the date thereof. The RCM Reports have been prepared in compliance with all applicable securities laws, rules and regulations, and the financial statements included therein had been prepared in accordance with general accepted accounting principles, consistently applied, and fairly presented the financial condition of RCM as of the date and for the periods covered thereby. 4.3 Capitalization. The authorized capital stock of RCM consists of 40,000,000 shares of common stock, par value $.05 per-share (the "RCM Common Stock"), of which 17,670,243 shares were outstanding on the date of this Agreement; all of which have been duly authorized, validly issued, and are fully paid and nonassessable and were issued in compliance with applicable federal and state securities laws and regulations. Except as set forth on Schedule 4.3, 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 or to sell, pledge, assign or otherwise transfer such securities. 4.4 Undisclosed Liabilities. Except as set forth on Schedule 4.4, or otherwise disclosed in this Agreement or any Schedules thereto, RCM does not have any liabilities or obligations of any nature, fixed or contingent, that will not be shown or 16 \PHILA2\100322_5 otherwise provided for in the RCM Reports, except for liabilities and obligations arising subsequent to the date of the RCM Reports in the ordinary course of business, none of which individually or in the aggregate will be materially adverse to the business or financial condition of RCM. 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 RCM that will not be adequately provided for. 4.5 Subsidiaries. Except as set forth on Schedule 4.5, RCM has no subsidiaries, nor does it own any interest in any other corporation, partnership or other entity, nor does it have any right or obligation, whether under any agreement (oral or written) or instrument of any kind, to acquire any such interest. 4.6 Material Adverse Changes. Except as specifically stated in Schedule 4.6, since the date of the most recent RCM Report to the date of this Agreement, the business of RCM 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 RCM for such period or at any time during such period; (b) Any material damage, destruction or loss (whether or not covered by insurance) affecting RCM or its assets, properties or business; (c) Any declaration, setting aside or payment of any dividend or other distribution in respect of any shares of the capital stock of RCM, or any direct or indirect redemption, purchase or other acquisition of any such stock or any agreement to do so; (d) Any cancellation or material breaches on any existing contract of which RCM is a party that would have a material adverse effect on the business of RCM; (e) To the knowledge of RCM, any statute, rule, regulation or order adopted by any governmental body, agency or authority that materially and adversely affects RCM or its business or financial condition; (g) Any agreements to materially increase the rate or terms of compensation payable or to become payable by RCM to its directors, officers or key employees; provided, however, that this subsection shall not restrict or limit RCM in any way from hiring additional personnel who are required for its operations; or 17 \PHILA2\100322_5 (h) Any other events or conditions of any character that may reasonably be expected to have a materially adverse effect on RCM or its business or financial condition. 4.7 Litigation. To the knowledge of RCM, except as set forth in Schedule 4.7, there are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending or threatened against RCM, whether at law or in equity, or before or by any federal, state, municipal, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, nor does RCM know of any basis for any such action, suit, claim, investigation or proceeding. 4.8 Compliance: Governmental Authorizations. To the best of its knowledge, RCM has complied in all material respects with all federal, state, local or foreign laws, ordinances, regulations and orders applicable to its business, including without limitation, federal and state securities, banking collection and consumer protection laws and regulations that, if not complied with, would materially and adversely affect its businesses. RCM has all federal, state, local and foreign governmental licenses and permits necessary for the conduct of its business. Such licenses and permits are in full force and effect. RCM does not know of any violations of any such licenses or permits. To the knowledge of RCM, no proceedings are pending or threatened to revoke or limit the use of such licenses or permits that would have an adverse effect on the business of RCM. 4.9 Taxes. Except as disclosed on Schedule 4.9, all (a) federal, state, local or foreign tax returns (collectively, the "RCM Returns") required to be filed with respect to the properties, assets, operations, income and net worth of RCM have been timely filed or appropriate extensions have been obtained and such RCM Returns are true, correct and complete; (b) taxes and governmental charges, including, without limitation, any interest and penalties (collectively, "RCM Taxes") due pursuant to such RCM Returns have been paid or adequate provision therefore has been made on the RCM Report; and (c) federal, state, local and foreign withholdings required with respect to the business of RCM have been withheld and timely paid over to the appropriate governmental authority. No RCM Returns have been audited or, to the knowledge of RCM, are currently being audited by the Internal Revenue Service. Except as disclosed on Schedule 4.9, there are no outstanding agreements or waivers extending the statutory period of limitation concerning any tax liability of RCM, no examination of any RCM Returns currently in progress and no governmental authority has, within the last three (3) years, notified RCM of any tax claim, investigation or proceeding. 4.10 Title to Property and Related Matters. RCM has, and at the time of the Closing Date will have, good and marketable title to all of its properties, interests in properties and assets, 18 \PHILA2\100322_5 real, personal and mixed, owned by it at the date of this Agreement or acquired by it after the date of this Agreement, of any kind or character, free and clear of any liens or encumbrances, except (i) those set forth in Schedule 4.10, and (ii) liens for current taxes not yet delinquent. Schedule 4.10 also contains a general description of all real property in which RCM has an ownership interest. Except as set forth in said Schedule 4.10 and except for matters that may arise in the ordinary course of business, the assets of RCM are in good operating condition and repair, reasonable wear and tear excepted. There does not exist any condition that materially interferes with the use thereof in the ordinary course of the business of RCM. 4.11 Licenses; Trademarks: Trade Names. Except as set forth on Schedule 4.11, RCM 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. 4.12 Employee; Benefit Plans. (a) Schedule 4.12 sets forth the number and names of the employees of RCM and the total 1995 compensation of each of the directors, officers and employees of RCM. (b) Schedule 4.12 identifies all "employee benefit plans" (as such term is defined in Section 3(3) of ERISA and programs, including, without limitation, any pension plans, health and welfare plans, life, disability, medical, dental or hospitalization insurance plans, sick-leave, vacation accrual or holiday plans, bonus, savings, profit-sharing or other similar benefit plans, deferred compensation, stock option, stock ownership and stock purchase plans covering employees or former employees of RCM. Except as disclosed on Schedule 4.12, each such plan or program has been operated substantially in accordance with its terms and, to the extent applicable, ERISA and the Code. RCM does not sponsor or contribute to, nor have they ever sponsored or been required to contribute to, any "multiemployer plan" as such term is defined in Section 3(37) of ERISA. (c) Except as disclosed on Schedule 4.12, RCM does not have any written contracts, or oral contracts, including any employment, management, agency or consulting contracts, with respect to any of its current or retired employees. (d) Except as disclosed on Schedule 4.12, RCM 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 4.12, RCM has complied in all material respects with all applicable laws relating 19 \PHILA2\100322_5 to the employment of labor, including the provisions thereof relating to benefits required to be provided under Part VI of Subtitle B of Title I of ERISA or Section 4980B(f) of the Code (collectively, "COBRA"), wages, hours, working additions, employee benefit plans and the payment of withholding and social security taxes. 4.13 Environmental Matters. Except as set forth in Schedule 4.13, RCM 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 RCM has not received any notification of any asserted present or past failure to so comply with such laws, rules or regulations. RCM has obtained and is in compliance with all permits, licenses and other authorizations required under federal, state and local laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials or wastes into ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials or wastes (collectively "Environmental Requirements"). RCM is not aware of, nor has received notice of, any circumstances which may interfere with or prevent continued compliance, or which may give rise to any liability, or otherwise form the basis of any claim, or investigation under Environmental Requirements, relating to the operation of RCM's business. For the purpose of this Section, "hazardous substances" shall include (1) hazardous substances as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and regulations thereunder and, (2) any substance for which state or local laws require the clean-up, removal or other special handling of such materials or imposing liability based upon improper handling thereof. 4.14 Insurance. Schedule 4.14 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 RCM, and identifies for each such policy, to the extent such information is reasonably available to RCM, the underwriter, policy number, coverage type, premium, expiration date and deductible. All of the insurance policies listed on Schedule 4.15 are outstanding and in full force and effect and all premiums required to be paid with respect to such policies are currently paid and are adequate in light of the business of RCM. 20 \PHILA2\100322_5 4.15 Bank Accounts. Schedule 4.15 contains a list of all bank accounts maintained by, or for the benefit of, RCM. 4.16 Customers. Set forth on Schedule 4.16 is a list of the ten (10) largest customers of RCM based on the dollar volume of income generated by that customer for the fiscal year ended September 30, 1995. No such customer has terminated or to RCM's knowledge is presently threatening to terminate its relationship with RCM. 4.17 Due Authorization. This Agreement has been duly authorized, executed, and delivered by RCM, and constitutes a legal, valid, and binding obligation of RCM, enforceable in accordance with its terms except as such enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting or affecting the enforcement of creditors rights generally or by the application of equitable principles. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance with any of the provisions hereof, will violate in any material respect any order, writ, injunction or decree of any court or governmental authority, or violate or conflict with in any material respect or constitute a default under (or give rise to any right of termination, cancellation or acceleration under), any provisions of RCM's Articles of Incorporation or Bylaws, the terms or conditions or provisions of any note, bond, lease, mortgage, obligation, agreement, arrangement or restriction of any kind to which the Acquiree is a party or by which RCM or its properties may be bound, or violate in any material respect any statute, law, rule or regulation applicable to RCM, except that the consents disclosed on Schedule 4.17 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. 4.18 RCM Shares. The RCM Shares to be delivered to the Acquiree Shareholders at Closing will be validly and legally issued, free and clear of all liens, encumbrances, transfer fees and preemptive rights, and will be fully paid and non-assessable. The RCM Shares will, however, constitute "restricted securities" as defined in Rule 144 promulgated under the Securities Act. 4.19 Brokerage Fees. Except for Acquest International, L.P., whose fees shall be paid by RCM, RCM has not incurred, and will not incur, any liability for brokerage or finder's fees or similar charges in connection with the transactions contained within this Agreement. 4.20 Accounts Receivable. The Financial Statements contained within the RCM Reports reflect the accounts receivable of RCM for the periods therein indicated. All of the accounts 21 \PHILA2\100322_5 receivable of RCM now and on the Closing Date, are bona fide accounts receivable of RCM representing the sales price of (or other sums or fees receivable for or in respect of) goods, merchandise, or services sold or performed by RCM 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 RCM Reports are not uncollectible or subject to offset or counterclaim or otherwise in controversy. 4.21 Agreements. Schedule 4.21 contains a true and complete list of all material contracts, agreements, mortgages, obligations, arrangements, restrictions and other instruments to which RCM is a party or by which RCM or its assets is currently bound. True and correct copies of all items set forth on Schedule 4.21 have been or will have been made available to Acquiree and Messrs. Blaire and Meyers 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 RCM under any of the contracts or agreements set forth in Schedule 4.21. RCM does not have any knowledge of any material default by the other parties to such contracts or agreements. 4.22 Approval. The Board of Directors of RCM have approved the execution of this Agreement and the transactions contemplated thereby. 4.23 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 22 \PHILA2\100322_5 agency in connection with the transactions contemplated by this Agreement. 5.2 Access to Information. At all times prior to the Closing Date or the earlier termination of this Agreement in accordance with the provisions of Section 11, each of the parties hereto shall provide to the other parties (and the other parties' authorized representatives) full access during normal business hours to the premises, properties, books, records, assets, liabilities, operations, contracts, personnel, financial information and other data and information of or relating to such party (including without limitation all written proprietary and trade secret information and documents, and other written information and documents relating to intellectual property rights and matters), and will cooperate with the other party in conducting its due diligence investigation of such party. 5.3 Confidentiality. (a) Confidentiality of RCM-Related Information. With respect to information concerning RCM that is made available to Acquiree or Acquiree 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 Acquiree Shareholders from a third party entitled to disclose it; (ii) become known publicly other than through Acquiree or Acquiree Shareholders or any party who received the same through Acquiree or Acquiree Shareholders; (iii) is required by law or court order to be disclosed by Acquiree or Acquiree Shareholders (after notice and opportunity to oppose such disclosure); or (iv) is disclosed with the express prior written consent thereto of RCM. Acquiree or Acquiree Shareholders shall undertake all necessary steps to ensure that the secrecy and confidentiality of such information will be maintained in accordance with the provisions of this subparagraph (a); 23 \PHILA2\100322_5 (b) Confidentiality of Acquiree-Related Information. With respect to information concerning Acquiree that is made available to RCM pursuant to the provisions of Section 5.2, RCM agrees that it shall hold such information in strict confidence, shall not use such information except for the sole purpose of evaluating the transactions to be undertaken pursuant to this Agreement and shall not disseminate or disclose any of such information other than to their directors, officers, employees, shareholders, affiliates, agents and representatives who need to know such information for the sole purpose of evaluating the transactions to be undertaken pursuant to this Agreement (each of whom shall be informed in writing by RCM of the confidential nature of such information and directed by such party to treat such information confidentially). If this Agreement is terminated pursuant to the provisions of Section 11, RCM agrees to return immediately all such information, all copies thereof and all information prepared by it based upon the same, upon Acquiree's request; provided, however, that one copy of all such material may be retained by RCM's outside legal counsel for purposes only of resolving any disputes under this Agreement. The above limitations on use, dissemination and disclosure shall not apply to information that: (i) is learned by RCM from a third party entitled to disclose it; (ii) becomes known publicly other than through RCM or any party who received the same through either of them; (iii) is required by law or court order to be disclosed by RCM (after notice and opportunity to oppose such disclosure); or (iv) is disclosed with the express prior written consent thereto of Acquiree. RCM agrees to undertake all necessary steps to ensure that the secrecy and confidentiality of such information will be maintained in accordance with the provisions of this subparagraph (b). 5.4 Nondisclosure. Neither RCM, Acquiree or Acquiree Shareholders shall disclose to the public or to any third party the existence of this Agreement or the transactions contemplated hereby or any other material non-public information concerning or relating to the other party hereto, other than with the express prior written consent of the other party hereto, except as may be required by applicable securities laws as they pertain to public companies, law or court order or to enforce the rights of such disclosing party under this Agreement, in which event the contents of any proposed disclosure shall be discussed with the other party before release; provided, however, that notwithstanding anything to the contrary contained in this Agreement, any party hereto may disclose this Agreement to any of its directors, officers, employees, shareholders, affiliates, agents and representative who need to know such information for the sole purpose of evaluating the transactions contemplated by this Agreement, to any party whose consent is required in connection with this Agreement; or to any regulatory body where such disclosure is required under federal or state law. 24 \PHILA2\100322_5 5.5 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. 5.6 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. 5.7 All Reasonable Efforts. Subject to the terms and conditions of this Agreement and to the fiduciary duties and obligations of the board of directors of Acquiree and RCM, each of the parties to this Agreement shall use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, or to remove any injunctions or other impediments or delays, legal or otherwise, as soon as reasonable practicable, to consummate the transactions contemplated by this Agreement. 5.8 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. 5.9 Expenses. Each party shall bear its own expenses in connection with the transactions contemplated by this Agreement; provided, however, that the (i) expenses of Acquiree and Acquiree Shareholders incurred in connection therewith shall not exceed $75,000 in the aggregate including legal, accounting (including costs related to the preparation and filing of the year-end and final tax returns and review and preparation of the Interim Financial Statements and Closing Financial Statements, however, excluding any costs relating the preparation of the 1995 Financial Statements) and other costs incurred by Acquiree and Acquiree Shareholders in connection with this Acquisition and (ii) Acquiree shall pay the expenses of Acquiree Shareholders related to this 25 \PHILA2\100322_5 acquisition. To the extent that Acquiree's expenses exceed $75,000, the Acquiree Shareholders shall reimburse Acquiree for such excess amount, if any, within 65 days after the Closing Date. 5.10 Consent of Auditors. Acquiree Shareholders shall, when necessary, obtain the necessary consents of all auditors who have provided audit reports in connection with any of the Financial Statements which may be required by RCM for the preparation and filing of documents and reports with the SEC. 5.11 Discharge of Bonuses. Any and all accrued bonuses or other compensation over and above historic compensation levels which may be due and owing to the Acquiree Shareholders shall be discharged and Acquiree released from such obligations on or before the Closing Date. 5.12 Loss of "S" Corporation Status. Upon completion of the transactions as contemplated by this Agreement, Acquiree Shareholders shall be responsible for the payment and filing of any final tax returns or other obligations incurred in connection with the termination of Acquiree's "S" Corporation status. 5.13 Documents at Closing. Each party to this Agreement agrees to execute and deliver on the Closing Date those documents identified in Section 6.2. 5.14 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 Schedules 3.A.6 and 4.6, 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 organization of such business, keep available the services of its present officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it and they shall not take any action, or fail to take any action, that is reasonably likely to result in any of their respective representations and warranties set forth in this Agreement becoming untrue as though such representations and warranties are made as of and on the Closing Date. 5.15 Tax and Accounting Treatment of Acquiree. Prior to Closing, Acquiree shall take any and all actions necessary to revoke its election to be treated as an S-Corporation pursuant to the Code and to change from the cash method of accounting to the accrual method of accounting. 26 \PHILA2\100322_5 5.16 Prohibition on Trading in RCM Stock. The Acquiree and Acquiree Shareholders acknowledge that the United States Securities Laws prohibit any person who has received material non-public information concerning the matters which are the subject matter of this Agreement from purchasing or selling the securities of RCM, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of RCM. Accordingly, the Acquiree Shareholders agree that they will not purchase or sell any securities of RCM, or communicate such material non-public information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of RCM, until no earlier than 72 hours following the dissemination of a Current Report on Form 8-K to the SEC announcing the Closing pursuant to this Agreement. 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 Clark, Ladner, Fortenbaugh & Young, 2005 Market Street, 22nd Floor, Philadelphia, PA 19103, 10:00 a.m, local time on March 11, 1996, 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." 6.2 Transactions at Closing. On the Closing Date, the following transactions shall occur, all of such transactions being deemed to occur simultaneously: (a) the Acquiree and Acquiree Shareholders will deliver, or cause to be delivered, to RCM the following: (i) stock certificates representing the Acquiree Shares being surrendered hereunder, duly endorsed with stock powers attached in blank; (ii) all corporate records of the Acquiree, including without limitation corporate minute books (which shall contain copies of the Articles of Incorporation and Bylaws, as amended to the Closing Date), stock books, stock transfer books, corporate seals; and such other corporate books and records as may reasonably be requested by RCM and its counsel; (iii) a certificate executed by the Acquiree and the Acquiree Shareholders to the effect that all representations and warranties made by the Acquiree and Acquiree Shareholders under this Agreement are true and correct as of the Closing Date, as though originally given to RCM on said date; 27 \PHILA2\100322_5 (iv) a certificate of good standing for the Acquiree from the Secretary of the State of New Jersey, 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) the Registration Rights Agreement described in Exhibit "B" signed by each of the Acquiree Shareholders; (ix) the Escrow Agreement described in Exhibit "A" signed by the Acquiree Shareholders and the Escrow Agent; (x) an Employment Agreement described in Exhibit "D" signed by Martin Blaire and RCM; (xi) an Employment Agreement described in Exhibit "E" signed by Barry Meyers and RCM; (xii) an Investor Representation Letter described in Exhibit "F" signed by each of the Acquiree Shareholders; (xiii) a Standstill and Shareholders' Agreement described in Exhibit "C" signed by each of the Acquiree Shareholders and RCM; (xiv) resignations of all officers and directors of Acquiree, following which Leon Kopyt and Barry Meyers shall be elected by RCM as the sole directors of Acquiree; (xv) any documentation associated with the transactions contemplated by Section 5.15 of this Agreement; (xvi) such documents as may be needed to accomplish the Closing under the corporate laws of the states of incorporation of RCM and Acquiree; (xvii) such other instruments, documents and certificates, if any, as are required to be delivered pursuant to 28 \PHILA2\100322_5 the provisions of this Agreement or that may be reasonably requested in furtherance of the provisions of this Agreement; (xviii) an opinion of counsel in form and substance satisfactory to RCM. (b) RCM will deliver or cause to be delivered to the Acquiree and the Acquiree Shareholders: (i) a certificate or certificates of RCM Common Stock which represent the Delivered Shares. The certificate or certificates of RCM Common Stock which represent the RCM Shares shall bear the following legend. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, BASED ON AN OPINION LETTER OF COUNSEL FOR THE CORPORATION OR A NON-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS IN OF AN AGREEMENT DATED AS OF MARCH 1, 1996 BETWEEN RCM TECHNOLOGIES, INC. AND THE PERSONS IDENTIFIED IN SUCH AGREEMENT AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT THE OFFICES OF THE CORPORATE SECRETARY OF RCM TECHNOLOGIES, INC." (ii) a certificate of RCM's President to effect that all representations and warranties of RCM under this Agreement are reaffirmed on the Closing Date, as though originally given to the Acquiree and the Acquiree Shareholders on said date; (iii) 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; (iv) certified resolution of the Secretary of RCM dated at or about the Closing Date authorizing the transactions contemplated under this Agreement; (v) an opinion of counsel in form and substance satisfactory to the Acquiree and the Acquiree Shareholders; (vi) the Registration Rights Agreement described in Exhibit "B" signed by each of the Acquiree Shareholders; 29 \PHILA2\100322_5 (vii) the Escrow Agreement described in Exhibit "A" signed by the Acquiree Shareholders and the Escrow Agent; (viii) an Employment Agreement described in Exhibit "D" signed by Martin Blaire and RCM; (ix) an Employment Agreement described in Exhibit "E" signed by Barry Meyers and RCM; (x) a Standstill and Shareholders' Agreement described in Exhibit "C" signed by each of the Acquiree Shareholders and RCM; (xi) such documents as may be needed to accomplish the Closing under the corporate laws of the state of incorporation of RCM and Acquiree; (xii) such other instruments, documents and certificates, if any, as are required to be delivered pursuant to the provisions of this Agreement, or that may be reasonably requested in furtherance of the provisions of this Agreement. (c) Blaire and Meyers shall deliver the Escrow Shares into escrow pursuant to the terms of the Escrow Agreement. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIREE AND ACQUIREE SHAREHOLDERS. All obligations of the Acquiree and the Acquiree Shareholders under this Agreement are subject to the fulfillment, prior to or on the Closing Date (unless otherwise stated herein), of each of the following conditions, any one or all of which may be waived by the Acquiree or the Acquiree Shareholders: 7.1 The transactions identified within this Agreement shall constitute a tax-free reorganization pursuant to Section 368 of the Code. 7.2 The Board of Directors of RCM shall have approved the execution of this Agreement and the transactions contemplated thereby. 7.3 The representations and warranties made by or on behalf of RCM contained in this Agreement or in any certificate or document delivered to the Acquiree or the Acquiree Shareholders pursuant to the provisions hereof at the Closing Date shall be true in all respects at and as of the time of the Closing Date as though such representations and warranties were made at and as of such time. 7.4 RCM shall have performed and complied in all material respects with all covenants, agreements and conditions 30 \PHILA2\100322_5 required by this Agreement to be performed or complied with by it prior to or at the Closing. 7.5 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. 7.6 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. 7.7 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. 7.8 RCM shall have obtained the approval of its principal lender of this Agreement and the transactions contemplated thereby. 7.9 The indebtedness owed by the Acquiree and Acquiree Shareholders to United Jersey Bank, excluding any prepayment penalties, as of the Closing shall have been discharged in full; the Acquiree and the Acquiree Shareholders and their spouses shall be removed from any guarantees with respect to such indebtedness; and evidence of such discharges shall be produced at Closing. 7.10 RCM shall have executed an Employment Agreement with each of Messrs. Blaire and Meyers substantially in form and substance similar to that attached hereto as Exhibits "D" and "E", respectively. 7.11 RCM and Acquiree Shareholders shall have executed a Standstill and Shareholders' Agreement substantially in form and substance similar to that attached hereto as Exhibit "C". 7.12 RCM and Acquiree Shareholders shall have executed a Registration Rights Agreement substantially in form and substance similar to that attached hereto as Exhibit "B". 7.13 RCM and Acquiree Shareholders shall have executed an Escrow Agreement substantially in form and substance similar to that attached hereto as Exhibit "A". 31 \PHILA2\100322_5 7.14 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. 7.15 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. 7.16 Leon Kopyt shall have agreed to remain employed by RCM as an executive officer of RCM for a period of at least two (2) years following the Closing. 7.17 There shall have occurred no material adverse change to the business, operations, assets, management, regulatory environment and business prospects of RCM. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF RCM. All obligations of RCM under this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions, any one or all of which may be waived in writing by RCM: 8.1 The Board of Directors of the Acquiree have approved the execution of this Agreement and the transactions contemplated thereby. 8.2 The representations and warranties made by the Acquiree and the Acquiree Shareholders contained in this Agreement or in any certificate or document delivered to RCM at the Closing pursuant to the provisions hereof shall be true in all respects at and as of the time of the Closing as though such representations and warranties were made at and as of such time. 8.3 The Acquiree and the Acquiree Shareholders shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing. 8.4 The Acquiree shall have delivered all of the Schedules required herein, and copies of the documents referred to therein, to RCM and such Schedules and documents shall have been reasonably acceptable to RCM. 8.5 There shall be delivered to RCM an officer's certificate of the Acquiree to the effect that all of the representations and warranties of the Acquiree set forth herein are true and complete in all material respects as of the Closing Date, 32 \PHILA2\100322_5 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 Messrs. Blaire and Meyers and the Minority Shareholders to the effect that the representations and warranties of Messrs. Blaire and Meyers and the Minority Shareholders made within this Agreement are true and correct in all material respects. 8.6 RCM shall have completed prior to the Closing Date, to its satisfaction, a due diligence review of the financial condition, results of operations, properties, assets, liabilities, business or prospects of the Acquiree. 8.7 RCM shall have obtained the approval of its principal lender of this Agreement and the transactions contemplated thereby. 8.8 Acquiree shall not have any "built-in gains" from the termination of its "S"-Corporation status. 8.9 All director, shareholder, lender, lessor and other parties' consents and approvals, as well as all filings with, and all necessary consents or approvals of, all federal, state and local governmental authorities and agencies, as are required of Acquiree or Acquiree Shareholders under this Agreement, applicable law or any applicable contract or agreement (all as contemplated by this Agreement) to complete the Closing shall have been secured. 8.10 No statute, rule, regulation, executive order, decree, injunction or restraining order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or governmental authority that prohibits or restricts the consummation of the Closing and the other transactions contemplated by this Agreement. 8.11 Acquiree Shareholders shall have executed a Registration Rights Agreement substantially in form and substance similar to that attached hereto as Exhibit "B". 8.12 Acquiree Shareholders shall have executed an Escrow Agreement substantially in form and substance similar to that attached hereto as Exhibit "A". 8.13 Messrs. Blaire and Meyers shall each have executed an Employment Agreement substantially in form and substance similar to that attached hereto as Exhibits "D" and "E", respectively. 8.14 Acquiree Shareholders shall have executed an Investor Representation Letter substantially in form and substance similar to that attached hereto as Exhibit "F". 33 \PHILA2\100322_5 8.15 Acquiree Shareholders shall have executed a Standstill and Shareholders' Agreement substantially in form and substance similar to that attached hereto as Exhibit "C". 8.16 Acquiree and Acquiree Shareholders shall take all actions necessary to effect the resignation of all of the current directors and officers of Acquiree in the manner identified in Section 6.2(a)(xiv). 8.17 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. 8.18 Financial Statements. (a) The 1995 Financial Statements of Acquiree shall reflect (i) gross revenues of at least $26 million; (ii) gross margin of no less than $6 million; (iii) "recast net income" of not less than $807,500; (iv) stockholders equity (defined as total assets less total liabilities) of at least $1,640,000; and (v) working capital (defined as total current assets less total current liabilities) of not less than $1,410,000. (b) For the purposes of subparagraph 8.18(a) above, the term "recast net income" shall be the net income of the Acquiree reflected on its 1995 Financial Statements (which amount shall be no less than $40,215), plus certain additions thereto of $767,285 for officer bonuses, fringe benefits, stock repurchase and discontinued operations. (c) The Acquiree shall have provided the Interim Financial Statements to RCM which reflect: (i) shareholders equity and working capital on the last day of the period covered by the Interim Financial Statements is no less than those required at subparagraphs 8.18(a)(iv) and (a)(v) above; and (ii) gross revenues, gross profits and recast net income (inclusive, for the purposes of the Interim Financial Statements, of expenses associated with this transaction identified in Section 5.9) through the period reflected therein in amounts that are in proportion to those required in subparagraphs 8.18(a)(i), (ii) and (iii) above to be reflected during Fiscal 1995, taking into account seasonality, expenses of this transaction and weather related business interruptions. For the purpose of subparagraphs 8.18(a) and 8.18(c) above, unless otherwise defined herein, the terms utilized therein shall have the respective meanings accorded to them under generally accepted accounting principles applied in a manner consistent with the most recent Financial Statements of Acquiree. 9. INDEMNIFICATION. 34 \PHILA2\100322_5 9.1 Messrs Blaire and Meyers. Messrs. Blaire and Meyers jointly and severally shall indemnify, defend and hold harmless, for such period of time as set forth in Section 13.3, RCM from and against any and all demands, claims, actions or causes of action, judgments, assessments, losses, liabilities, damages or penalties and reasonable attorneys' fees and related disbursements (collectively, "Claims") where such Claim or Claims, in the aggregate exceed $50,000, and in such case for the entire amount of such Claim or Claims in the aggregate, incurred by RCM which arise out of or result from a misrepresentation, breach of warranty, or breach of any covenant of Acquiree or Acquiree Shareholders contained herein or in the Schedules annexed hereto or in any other documents or instruments furnished by the Acquiree or Acquiree Shareholders pursuant hereto or in connection with the transactions contemplated hereby or thereby. Notwithstanding the preceding sentence, the liability of Messrs. Blaire and Meyers arising from this Agreement or the transactions related thereto shall be limited to the Escrow Shares in accordance with the terms of the Escrow Agreement, except, however, where there is evidence of bad faith, fraud or wanton misconduct, the liability of Messrs. Blaire and Meyers arising form this Agreement or the transactions related thereto shall be unlimited and Messrs. Blaire and Meyers shall be liable for the entire amount of such Claim. In addition, in the event that a Claim is based on Section 3.A.10, then RCM shall assume the defense of such Claim on behalf of Messrs. Blaire and Meyers at no cost to Messrs. Blaire and Meyers, however, Messrs. Blaire and Meyers shall be liable for any monetary damages which may result from a Claim based on Section 3.A.10, provided further, that Messrs. Blaire and Meyers' liability for such monetary damages shall be limited to the Escrow Shares. 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 Shareholder which arise out of or result from a misrepresentation, breach of warranty or breach of any covenant of RCM contained herein or in any ancillary certificates or other documents or instruments furnished by RCM pursuant hereto or in connection with the transactions contemplated hereby or thereby. 9.3 Methods of Asserting Claims for Indemnification. All claims for indemnification under this Agreement shall be asserted as follows: (a) Third Party Claims. In the event that any Claim for which a party (the "Indemnitee") would be entitled to indemnification under this Agreement is asserted against or sought to be collected from the Indemnitee by a third party the Indemnitee shall promptly notify the other party (the "Indemnitor") of such Claim, specifying the nature thereof, the applicable provision in this Agreement or other instrument under which the Claim arises, and the amount or the estimated amount thereof (the "Claim 35 \PHILA2\100322_5 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 avoid any risk of damage to the Indemnitee; and all costs and expenses of such proceedings and the amount of any judgment shall be paid by the Indemnitor. If the Indemnitee desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense. If the Indemnitor has disputed the Claim, as provided above, and shall not defend such Claim, the Indemnitee shall have the right to control the defense or settlement of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor for its reasonable costs and expenses of such defense if it shall thereafter be found that such Claim was subject to indemnification by the Indemnitor hereunder. (b) Non-Third Party Claims. In the event that the Indemnitee should have a Claim for indemnification hereunder which does not involve a Claim being asserted against it or sought to be collected by a third party, the Indemnitee shall promptly send a Claim Notice with respect to such Claim to the Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice Period that it disputes such Claim, the Indemnitor shall pay the amount thereof to the Indemnitee. If the Indemnitor disputes the amount of such Claim, and settlement among the parties cannot be reached within 45 days, the controversy in question shall be submitted to arbitration pursuant to paragraph 13 hereafter. Once the amount in controversy has been settled either among the parties or by virtue of arbitration or default, if the party against whom such liability rests is an Acquiree Shareholder, then such Claim may be paid in cash or in stock. Payments in stock by an Acquiree Shareholder may be made by application to the Escrow Agent in accordance with the terms of the Escrow Agreement. (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. 10. TERMINATION. This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned at any time prior to the Closing Date: 36 \PHILA2\100322_5 (a) by mutual written consent of RCM and Acquiree; (b) by any of RCM and Acquiree: (i) if the Closing shall not have occurred by the Closing Date unless such date is extended by the mutual written agreement of RCM and Acquiree, and in such event, only until the date the Closing Date has been so extended; provided, however, that the right to terminate this Agreement under this Section 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. 11. NOTICES. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered in person or sent by overnight delivery, confirmed telecopy or prepaid first class registered or certified mail, return receipt requested, to the following addresses, or such other addresses as are given to the other parties to this Agreement in the manner set forth herein: 11.1 If to RCM, to: Mr. Leon Kopyt Chief Executive Officer RCM Technologies, Inc. 2500 McClellan Avenue, Suite 350 Pennsauken, New Jersey 08109-4613 37 \PHILA2\100322_5 with a courtesy copy to: Stephen M. Cohen, Esq. Clark Ladner Fortenbaugh & Young One Commerce Square 2005 Market Street Philadelphia, Pennsylvania 19103 Telephone Number: (215) 241-1800 Telecopy Number: (215) 241-1857 and Norman Berson, Esquire Fineman & Bach, P.C. 1608 Walnut Street Philadelphia, PA 19103 11.2 If to the Acquiree Shareholders, to: Martin Blaire Lewis Road Irvington, NY 10533 Barry Meyers 384 Highview Terrace Ridgewood, NJ 07450 Howard Ross 1260 Westover Road Stamford, CT 06902 Marie Wolfson 210 Marc Boulevard Boonton, NJ 07005 Alexander Valcic 412 East 55th Street New York, NY 10022 11.3 If to the Acquiree, to: The Consortium 277 Fairfield Road Fairfield, NJ 07004 Telephone Number: (201) 227-3700 Telecopy Number: (201) 882-7704 with a courtesy copy to: Joshua B. Gillon, Esquire 38 \PHILA2\100322_5 Schneck Weltman Hashmall & Mischel LLP 1285 Avenue of the Americas New York, NY 10019 Telephone Number: (212) 956-1500 Telecopy Number: (212) 956-3252 Any such notices shall be effective when delivered in person or sent by telecopy, one business day after being sent by overnight delivery or three business days after being sent by registered or certified mail. Any of the foregoing addresses may be changed by giving notice of such change in the foregoing manner, except that notices for changes of address shall be effective only upon receipt. 12. ARBITRATION. If a dispute arises as to interpretation of this Agreement, it shall be decided finally by three arbitrators in an arbitration proceeding conforming to the Rules of the American Arbitration Association applicable to commercial arbitration. The arbitrators shall be appointed as follows: one by RCM, one by the Acquiree Shareholders and the third by the said two arbitrators, or, if they cannot agree, then the third arbitrator shall be appointed by the American Arbitration Association. The third arbitrator shall be chairman of the panel and shall be impartial. The arbitration shall take place in Princeton, New Jersey. The decision of a majority of the Arbitrators shall be conclusively binding upon the parties and final, and such decision shall be enforceable as a judgment in any court of competent jurisdiction. Each party shall pay the fees and expenses of the arbitrator appointed by it, its counsel and its witnesses. The parties shall share equally the fees and expenses of the impartial arbitrator. 13. MISCELLANEOUS. 13.1 Further Assurances. At any time, and from time to time, after the Closing Date, each party will execute such additional instruments and take such further action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement. 13.2 Nature of Representations and Warranties. All of the parties hereto are executing and carrying out the provisions of this Agreement in reliance on the representations, warranties, covenants and agreements contained in this Agreement or at the Closing of the transactions herein provided for, and any investigation that they might have made or any other representations, warranties, covenants, agreements, promises or information, written or oral, made by the other party or parties or any other person shall not be deemed a waiver of any breach of any such representation, warranty, covenant or agreement. 39 \PHILA2\100322_5 13.3 Survival of Representations. All covenants, agreements, representations and warranties made herein shall survive the Closing Date for a period of eighteen (18) months from the Closing Date, except such survival period shall be unlimited where there is evidence of bad faith, fraud or wanton misconduct. All covenants and agreements by or on behalf of the parties hereto that are contained or incorporated in this Agreement shall bind and inure to the benefit of the successors and assigns of all parties hereto. 13.4 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. It supersedes all prior negotiations, letters and understandings relating to the subject matter hereof. 13.5 Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of any such amendment, supplement or modification is sought. 13.6 Assignment. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties. 13.7 Choice of Law. This Agreement shall be interpreted, construed and enforced in accordance with the laws of the State of New Jersey. 13.8 Headings. The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this agreement. 13.9 Number and Gender. Words used in this Agreement, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. 13.10 Construction. The parties hereto and their respective legal counsel participated in the preparation of this Agreement; therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof. 13.11 Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party of any breach of any provision of this Agreement will not be construed to be a waiver by any such party of any succeeding breach of that provision or a waiver by such party of any breach of any other provision. 40 \PHILA2\100322_5 13.12 Severability. The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect any other provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. 13.13 Binding Nature. This Agreement will be binding upon and will inure to the benefit of any successor or successors of the parties hereto. 13.14 No Third-Party Beneficiaries. No person shall be deemed to possess any third-party beneficiary right pursuant to this Agreement. It is the intent of the parties hereto that no direct benefit to any third party is intended or implied by the execution of this Agreement. 13.15 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. 13.16 Facsimile Signature. This Agreement may be executed and accepted by facsimile signature and any such signature shall be of the same force and effect as an original signature. 41 \PHILA2\100322_5 IN WITNESS THEREOF, the parties have executed this Agreement as of the date first above written. RCM TECHNOLOGIES, INC. ATTEST By: By: Name: Title: THE CONSORTIUM ATTEST By: By: Name: Title: Martin Blaire Barry Meyers Howard Ross Marie Wolfson Alexander Valcic EX-4 3 REGISTRATION RIGHTS AGREEMENT \PHILA2\99664_3 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement is dated as of March 11, 1996 by and among RCM Technologies, Inc., a Nevada corporation (the "Company") and the Shareholders of The Consortium, a New Jersey corporation, listed on Schedule "A" attached hereto and made a part hereof (the "Holders"). W I T N E S S E T H: WHEREAS, the Company and Holders are parties to a Stock Purchase Agreement dated as of March 1, 1996 (the "Stock Purchase Agreement") pursuant to which the Company acquired 100% of the outstanding stock of The Consortium (the "Acquisition"); WHEREAS, pursuant to the Acquisition, the Holders are to receive certain shares of the Company's $.05 par value common stock (the "Common Stock"); WHEREAS, the parties hereto desire to set forth their agreement concerning the registration under the Securities Act of 1933, as amended of the Common Stock issued to the Holders in connection with the Acquisition. NOW, THEREFORE, the parties hereto agree as follows: AGREEMENT 1. Definitions. (a) "Acquisition" shall mean the Acquisition by the Company of 100% of the outstanding stock of The Consortium pursuant to the terms of the Stock Purchase Agreement entered into on March 1, 1996. (b) "Closing" shall mean that date upon which a closing of the Acquisition occurs. (c) "Company" shall mean RCM Technologies, Inc. (d) "Exchange Act" shall mean the Securities Exchange Act of 1934. (e) "Holders" shall mean the former shareholders of The Consortium (identified on the signature page hereof) who have \PHILA2\99664_3 received shares of the Company's Common Stock pursuant to the Acquisition. (f) "Restricted Stock" shall mean the Common Stock of the Company that has been issued to the Holders pursuant to the Acquisition and any Common Stock issued as a dividend or distribution with respect to, or in exchange or replacement of, such Common Stock. (g) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at any relevant time. (h) "SEC" shall mean the United States Securities and Exchange Commission. (i) "Trading Day" shall mean any day on which the New York Stock Exchange is open for trading. Capitalized terms used in this Registration Rights Agreement and not otherwise defined herein shall have the same meaning ascribed thereto in the Stock Purchase Agreement. 2. Shelf Registration. (a) RCM shall prepare and file, not later than February 15, 1997, a Registration Statement with the SEC and use its best efforts to as promptly as possible have such Registration Statement declared effective for the purpose of facilitating the public resale of the Restricted Stock subject to the limitations upon resale set forth at subparagraph 2(c) hereafter, or as otherwise contained herein. The Company shall not be obligated to obtain a commitment from an underwriter relative to the sale of such Restricted Stock, whether in a public offering or private placement transaction; nor shall the Company be restricted in any manner from including the distribution, issuance or resale of any other securities within such Registration Statement. (b) RCM agrees to indemnify and hold harmless each of the Holders, requesting or joining in a registration, each underwriter (as defined in the Securities Act) if any managing the offering of the securities thereunder, each person who controls any such Holder or underwriter within the meaning of Section 15 of the Securities Act and/or Section 20 of the Exchange Act and each of the officers, directors, employees and agents of the foregoing in their respective capacities as such, to the fullest extent 2 \PHILA2\99664_3 permitted by law, from and against any and all actions, suits, claims, proceedings, costs, losses, damages, judgments, amounts paid in settlement and expenses (including without limitation reasonable attorneys' fees and disbursements) to which any of them may become subject under the Securities Act or otherwise insofar as the same arise out of or are based on (i) any untrue or alleged untrue statement of any material fact contained in such Registration Statement on the effective date thereof, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereof, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation by RCM of any federal or state law, rule or regulation applicable to RCM and relating to action required of or inaction by RCM in connection with any such registration. (c) Public resale by the Holders of the Restricted Stock shall be subject to the following limitations: (i) no public resales by any of the Holders will be permitted earlier than April 1, 1997; (ii) from April 1, 1997 through March 11, 1998 (the second anniversary of the Closing) all public resales by Martin Blaire and Barry Meyers, in the aggregate, will be limited to that number of shares of Restricted Stock that upon resale will yield gross proceeds to Messrs. Blaire and Meyers of $600,000, and no public resales will be permitted during this period by any of the other Holders; (iii) from March 11, 1998 (the second anniversary of the Closing through March 11, 1999 (the third anniversary of the Closing), each of the Holders will be permitted to effectuate the public resale of shares of Restricted Stock limited in a manner calculated under Rule 144(e) under the Act (as such Rule is in effect on the Closing), as though such shares of Restricted Stock were treated as "restricted securities" held by "affiliates" or "persons other than affiliates," whichever the case may be, to the extent such terms are defined under Rule 144, however, in no event greater than 50,000 shares per week per Holder; and (iv) following March 11, 1999 (the third anniversary of the Closing), public resales of the Restricted Stock will be permitted without regard to numerical limitations under this subparagraph 2(c). 3. Registration Procedures. The Company shall: (a) prepare and file with the Commission a Registration Statement with respect to the Restricted Stock by no later than February 15, 1997 and use its best efforts to cause such Registration Statement to become effective as promptly as possible and to remain effective until all of the Restricted Stock has been sold pursuant thereto; 3 \PHILA2\99664_3 (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the period specified in Subparagraph 3(a) above and to comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such Registration Statement in accordance with the Holders' intended method of disposition set forth in such Registration Statement for such period; (c) furnish to each Holder and to each underwriter, if any, such number of copies of the Registration Statement and the prospectus included therein (including each preliminary prospectus), as such persons may reasonably request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such Registration Statement; (d) use its best efforts to register or qualify the Restricted Stock covered by such Registration Statement under the securities or blue sky laws of such jurisdictions as the Holders, or, in the case of an underwritten public offering, the managing underwriter shall reasonably request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) immediately notify each Holder under such Registration Statement and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances under which they were made; (f) make available for inspection by each Holder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such Holder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney, accountant or agent in connection with such Registration Statement; 4 \PHILA2\99664_3 (g) For purposes of Subparagraphs 3(a) and 3(b) above, the period of distribution of Restricted Stock shall be deemed to extend until (A) in an underwritten public offering of all of the Restricted Stock, each underwriter has completed the distribution of all securities purchased by it; and (B) in any other registration, all shares of Restricted Stock covered thereby shall have been sold; (h) if the Common Stock of the Company is listed on any securities exchange or automated quotation system, the Company shall use its best efforts to list (with the listing application being made at the time of the filing of such Registration Statement or as soon thereafter as is reasonably practicable) the Restricted Stock covered by such Registration Statement on such exchange or automated quotation system; (i) enter into normal and customary underwriting arrangements or an underwriting agreement and take all other reasonable and customary actions if the Holders sell their shares of Restricted Stock pursuant to an underwriting (however, in no event shall the Company, in connection with such underwriting, be required to undertake any special audit of a fiscal period in which an audit is normally not required); (j) notify the Holders if there are any amendments to the Registration Statement, any requests by the SEC to supplement or amend the Registration Statement, or of any threat by the SEC or state securities commission to undertake a stop order with respect to sales under the Registration Statement; and (k) cooperate in the timely removal of any restrictive legends from the shares of Restricted Stock in connection with the resale of such shares covered by an effective Registration Statement. 4. Expenses. (a) For the purposes of this Paragraph (4), the term "Registration Expenses" shall mean: all expenses incurred by the Company in complying with paragraphs (2) and (3) of this Agreement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, "blue sky" fees, fees of the National Association of Securities Dealers, Inc. ("NASD"), fees and expenses of listing shares of Restricted Stock on any securities exchange or automated quotation system on which the Company's shares are listed and fees of transfer agents and 5 \PHILA2\99664_3 registrars. The term "Selling Expenses" shall mean: all underwriting discounts and selling commissions applicable to the sale of Restricted Stock and all accountable or non-accountable expenses paid to any underwriter in respect of the sale of Restricted Stock. (b) Except as otherwise provided herein, the Company will pay all Registration Expenses in connection with the Registration Statement filed pursuant to paragraphs (2) and (3) of this Agreement. All Selling Expenses in connection with any Registration Statement filed pursuant to paragraphs (2) and (3) of this Agreement shall be borne by the participating Holders in proportion to the number of shares sold by each, or by such persons other than the Company (except to the extent the Company may be a seller) as they may agree. 5. Obligations of Holder. (a) In connection with each registration hereunder, each selling Holder will furnish to the Company in writing such information with respect to such seller and the securities held by such seller, and the proposed distribution by them as shall be reasonably requested by the Company in order to assure compliance with federal and applicable state securities laws, as a condition precedent to including such seller's Restricted Stock in the Registration Statement. Each selling Holder also shall agree to promptly notify the Company of any changes in such information included in the Registration Statement or prospectus as a result of which there is an untrue statement of material fact or an omission to state any material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances in which they were made. (b) In connection with each registration pursuant to paragraph (2) of this Agreement, the Holders included therein will not effect sales thereof until notified by the Company of the effectiveness of the Registration Statement, and thereafter will suspend such sales after receipt of telegraphic or written notice from the Company to suspend sales to permit the Company to correct or update a Registration Statement or prospectus. 6. Information Blackout. (a) At any time when a registration statement effected pursuant to Paragraph 2 relating to Restricted Stock is effective, upon written notice from the Company to the Holders that the Company has determined in good faith that sale of Restricted Stock pursuant to the registration statement would require disclosure of non-public material information, all Holders shall suspend sales of Restricted Stock pursuant to such registration statement until the earlier of: (i) thirty (30) days after the Company makes such good faith determination, and (ii) such time as the Company notifies the Holders that such material information has been disclosed to the public or has ceased to be material or that sales pursuant to such registration statement may otherwise be resumed. 6 \PHILA2\99664_3 7. Miscellaneous Provisions. (a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. (b) Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders. (d) Notices. All communications under this Agreement shall be sufficiently given if delivered by hand or by overnight courier or mailed by registered or certified mail, postage prepaid, addressed, (i) if to the Company, to: Mr. Leon Kopyt Chief Executive Officer RCM Technologies, Inc. 2500 McClellan Avenue, Suite 350 Pennsauken, New Jersey 08109-4613 Telephone Number: (609) 486-1777 Telecopy Number: (609) 488-8833 with a copy to: Stephen M. Cohen, Esquire Clark, Ladner, Fortenbaugh & Young One Commerce Square 2005 Market Street, 22nd Floor Philadelphia, PA 19103 Telephone Number: (215) 241-1868 Telecopy Number: (215) 241-1857 (ii) if to the Holders, to: Barry Meyers 384 Highview Terrace Ridgewood, NJ 07450 7 \PHILA2\99664_3 Martin Blaire Lewis Road Irvington, NY 10533 Marie Wolfson 210 Marc Boulevard Boonton, NJ 07005 Howard Ross 1260 Westover Road Stamford, CT 06902 Alexander Valcic 412 East 55th Street New York, NY 10022 with a copy to: Joshua B. Gillon, Esquire Schneck Weltman Hashmall & Mischel LLP 1285 Avenue of the Americas New York, NY 10019 Telephone Number: (212) 956-1500 Telecopy Number: (212) 956-3252 or, at such other address as any of the parties shall have furnished in writing to the other parties hereto. (e) Successors and Assigns; Holders as Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns, and the agreements of the Company herein shall inure to the benefit of all Holders and their respective successors and assigns. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Entire Agreement; Survival; Termination. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 8 \PHILA2\99664_3 ATTEST: RCM TECHNOLOGIES, INC. By:____________________________ By: __________________ Name: Title: - ---------------------------- Barry Meyers - ---------------------------- Martin Blaire - ---------------------------- Marie Wolfson - ---------------------------- Howard Ross - ----------------------------- Alexander Valcic \PHILA2\99664_3 SCHEDULE A List of Shareholders of The Consortium Martin Blaire Barry Meyers Marie Wolfson Howard Ross Alexander Valcic 10 EX-99 4 ESCROW AGREEMENT, DATED MARCH 11, 1996 \PHILA2\99813_4 ESCROW AGREEMENT THIS ESCROW AGREEMENT ("Agreement") dated as of March 11, 1996 among RCM TECHNOLOGIES, INC., a Nevada corporation ("RCM"), MARTIN BLAIRE and BARRY MEYERS (in the aggregate, the "Acquiree Shareholders") and Acquest International, L.P., as escrow agent (the "Escrow Agent"). WHEREAS, RCM, Acquiree, Acquiree Shareholders and three other shareholders of Acquiree have previously entered into a Stock Purchase Agreement dated as of March 1, 1996 (the "Stock Purchase Agreement"), providing for the purchase of 100% of the outstanding stock of Acquiree by RCM on the Closing Date (the "Acquisition"); and WHEREAS, the Stock Purchase Agreement provides in Section 2.4 for the establishment of an escrow fund whereby a portion of the RCM Shares consisting of 1,625,000 shares of the Common Stock of RCM (the "Escrow Shares") shall upon the closing of the Acquisition be placed in escrow to secure the obligation of the Acquiree Shareholders to pay the Excess Tax Liability under Section 2.3 of the Stock Purchase Agreement and for possible indemnification claims presented by RCM against Acquiree Shareholders under Section 10 of the Stock Purchase Agreement, in each case in the manner and to the extent set forth herein and in the Stock Purchase Agreement. NOW, THEREFORE, in consideration of RCM, Acquiree and Acquiree Shareholders entering into the Stock Purchase Agreement and of the mutual premises and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. Definitions, Other Agreements. (a) All capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Stock Purchase Agreement. In addition, the term "Escrow Fund" and references to the Escrow Shares when used at any time shall mean all shares of common stock of RCM owned by Acquiree Shareholders held in escrow hereunder by the Escrow Agent. (b) It is expressly understood and agreed by the parties hereto that all references in this Agreement to the Stock Purchase Agreement and to any exhibits to such Stock Purchase Agreement are for the convenience of the parties hereto other than the Escrow Agent, and the Escrow Agent shall have no obligations or duties with respect thereto other than the obligation to refer to the Stock Purchase Agreement for the purpose of determining the definitions of certain capitalized terms used herein and not otherwise defined herein or to interpret any provisions of such other agreements referred to in this Agreement for purposes of implementation thereof. SECTION 2. Appointment of Escrow Agent. \PHILA2\99813_4 Acquest International, L.P. hereby accepts its appointment as Escrow Agent to serve in accordance with the terms, conditions and provisions of this Agreement. The acceptance by the Escrow Agent of its duties under this Agreement is subject to the terms and conditions set forth at Section 7 hereafter, which the parties to this Agreement hereby agree shall govern and control with respect to the rights, duties, liabilities and immunities of the Escrow Agent. SECTION 3Establishment of Escrow Fund. (a) On the Closing Date, Acquiree Shareholders shall, pursuant to Section 2.4 of the Stock Purchase Agreement, deposit with the Escrow Agent the stock certificates evidencing the Escrow Shares (which consist of 1.625 million shares of RCM Common Stock), all of which shall be registered on the share transfer books of RCM in the names of the Acquiree Shareholders who own the Escrow Shares comprising the Escrow Fund. If dividends are paid, or a distribution is made, by RCM with respect to the Escrow Shares, in cash or in property, such dividends or distributions shall also be held as a part of the Escrow Fund. In the event of any stock splits, recapitalizations or other adjustments to the capital stock of RCM, the resulting number of shares or other securities which the Escrow Shares convert shall be deemed the Escrow Fund. (b) By virtue of the Acquiree Shareholders' execution of this Escrow Agreement, the Acquiree Shareholders have, without any further act of any Acquiree Shareholder, consented to: (i) the establishment of this escrow pursuant to the Stock Purchase Agreement in the manner set forth herein, and (ii) all of the other terms, conditions and limitations in this Agreement. SECTION 4Operation and Administration of the Escrow Fund. (a) To the extent provided herein and in the Stock Purchase Agreement, the Escrow Fund shall be established and thereafter applied (i) to the Excess Tax Liability which may be owed by the Acquiree Shareholders to RCM as provided in Section 2.3 of the Stock Purchase Agreement; and (ii) to the payment of indemnification claims asserted by RCM during the eighteen (18) month period following Closing ("Claims") for the benefit of RCM as provided in Section 10 of the Stock Purchase Agreement. (b) RCM shall make application to the Escrow Agent, with a copy to the Acquiree Shareholders (the "Application"), if it has incurred or suffered damages or losses (i) for any unpaid Excess Tax Liability by virtue of Acquiree Shareholders' failure to timely pay such liabilities pursuant to Section 2.3 of the Stock Purchase Agreement or (ii) for damages or losses to which it is entitled to indemnification under Section 10 of the Stock Purchase Agreement. The Application shall identify the amount of the damages or losses 2 \PHILA2\99813_4 (the "Claim Amount") and state that the Acquiree Shareholders have elected to apply the Claim Amount against the Escrow Shares. (c) Unless the Escrow Agent is otherwise informed in writing by either or both of the Acquiree Shareholders within 20 days from the date of the Application, that either or both of them dispute the Claim Amount or the application thereof against the Escrow Shares, then the Escrow Agent shall release to RCM for cancellation that number of Escrow Shares as are equal in "value" to the Claim Amount. For this purpose, the "value" of the Escrow Shares shall be determined by the average closing price of the shares of Common Stock of RCM as traded on The NASDAQ Stock Market or other principal exchange upon which its shares are regularly traded for the twenty (20) trading days immediately preceding the date of the Claim Notice. The Escrow Agent shall release the Escrow Shares to RCM for cancellation on a prorata basis based upon the proportionate interest of each of the Acquiree Shareholders in and to the Escrow Fund. (d) If the Escrow Agent is notified that either or both of the Acquiree Shareholders in good faith contest the Claim Amount or the application of the Claim Amount against the Escrow Shares, then, and in that event, the Escrow Agent shall be permitted to submit the issues in dispute to arbitration in accordance with the provisions of Section 13 of the Stock Purchase Agreement. Once these issues have been resolved in accordance with the arbitration procedure set forth within the Stock Purchase Agreement and if the resolution of the dispute is such that the Acquiree Shareholders owe money to RCM, then Acquiree Shareholders shall have 10 days to satisfy such liability, and if such liability is not timely satisfied, then in such event, the Escrow Agent shall release to RCM for cancellation that number of Escrow Shares as are equal in "value" to the amount of the Acquiree Shareholders' liability determined in arbitration; whereupon such Claim Amount shall be deemed satisfied in full by virtue of the application of such Escrow Shares. For this purpose, the term "value" of the Escrow Shares shall be determined in accordance with subparagraph (c) above. SECTION 5. Release of Escrow Shares; Termination. (a) Subject to the provisions of subparagraph (c) below, on the date that is one (1) year following the Closing Date (the "Determination Date"), the Escrow Agent shall make a determination of the greater of: (i) 10% of the number of shares of RCM Common Stock issued to the Acquiree Shareholders at the Closing, as adjusted for any subsequent stock splits, recapitalizations or any other adjustment to the capital stock of RCM; or (ii) such number of shares of RCM Common Stock with a value equal to RCM's independent accountants' good faith estimate of the Excess Tax Liability (which estimate RCM shall cause to be delivered to the 3 \PHILA2\99813_4 Acquiree Shareholders and the Escrow Agent prior to the Determination Date). The number of Escrow Shares so determined by the Escrow Agent shall hereafter be referred to as the "Remaining Escrow Shares". (b) The Remaining Escrow Shares shall continue to be held in escrow subject to the terms of this Agreement and shall continue to be subject to cancellation in the manner provided for at Section 4 until the eighteenth (18th) month following the Closing Date. (c) In addition to the Remaining Escrow Shares, on the Determination Date, upon written notification from any of the parties hereto, the Escrow Agent shall retain in escrow that number of Escrow Shares that may, upon reasonable estimate, be necessary in order to satisfy any pending, outstanding or contested Claims under the Stock Purchase Agreement. These Escrow Shares shall continue to be held in escrow until resolution of these claims. (d) Escrow Shares in excess of the sum of: (i) the Remaining Escrow Shares; and (ii) the Escrow Shares retained pursuant to subparagraph (c) above shall be released to the Acquiree Shareholders on the Determination Date. (e) On the date that is eighteen (18) months following the Closing Date (the "Release Date"), the Escrow Agent shall continue to retain in escrow subject to the terms of this Agreement any Escrow Shares that, in RCM's independent accountants' good faith estimate (which estimate RCM shall cause to be delivered to the Acquiree Shareholders and the Escrow Agent prior to the Release Date), may be required to satisfy the Excess Tax Liability, to the extent that the Excess Tax Liability has not been satisfied otherwise as of that date, and any Escrow Shares that may, upon reasonable estimate, be necessary to satisfy any pending, outstanding or contested RCM Claims timely submitted pursuant to Section 10 of the Stock Purchase Agreement executed on even date herewith. The balance of the Escrow Shares shall be released to the Acquiree Shareholders. The Escrow Shares retained pursuant to this subparagraph shall remain subject to escrow until resolution of the matters identified herein. (f) Upon resolution of the Excess Tax Liability pursuant to Section 2.3 of the Stock Purchase Agreement, the portion of the Escrow Shares held in Escrow to secure such liability shall be released as provided therein. (g) Once all of the Escrow Shares have been either released to RCM for cancellation or returned to the Acquiree Shareholders, the provisions of this Escrow Agreement shall no longer be of any force and effect and this Escrow Agreement shall be deemed to have terminated. 4 \PHILA2\99813_4 SECTION 6. Fees and Expenses of Escrow Agent. The Escrow Agent shall be entitled to reimbursement of all reasonable out-of-pocket expenses incurred by the Escrow Agent in connection with the performance of his functions hereunder, including reasonable fees and disbursements of counsel. The responsibility for payment of reimbursements to the Escrow Agent shall be assumed by RCM. SECTION 7. Duties and Liabilities of the Escrow Agent. (a) The Escrow Agent shall act hereunder as depositary only, and it shall not be responsible or liable in any manner whatever for any determinations regarding the cancellation and forfeiture of the Escrow Shares to be made pursuant to Section 4 hereof. It is agreed that the duties and obligations of the Escrow Agent are those herein specifically provided and no other. Except as otherwise specifically provided in this Agreement, the Escrow Agent shall not have any liability under, nor duty to inquire into, the terms and provisions of any agreement or instrument, other than this Agreement. The duties of the Escrow Agent are ministerial in nature, and the Escrow Agent shall not incur any liability whatsoever other than for its own willful misconduct or gross negligence. (b) The Escrow Agent shall not incur any liability for following the instructions herein contained or expressly provided for, or written instructions given by the parties hereto. The Escrow Agent shall not have any responsibility for the genuineness or validity of any document or other material presented to or deposited with it nor shall it have any liability for any action taken, suffered or omitted in accordance with any written instructions or certificates given to it hereunder and believed by it in good faith to be what it purports to be and to be signed by the proper party or parties, nor for retaining the Escrow Fund in the absence of instructions to the contrary. (c) The Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection with this Agreement, except its own gross negligence or willful misconduct. (d) The Escrow Agent may consult with, and obtain the advice of, legal counsel selected by it in the event of any question as to any of the provisions hereof or its duties hereunder, and the Escrow Agent shall incur no liability and shall be fully protected for any action taken, suffered or omitted by it in good faith in accordance with the advice of such counsel, provided that the Escrow Agent shall have used reasonable care in the selection of such counsel. 5 \PHILA2\99813_4 (e) In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall have received instructions, claims or demands from any party hereto which, in its reasonable opinion, conflict with any of the provisions of this Agreement or with instructions, claims or demands of any other party hereto, the Escrow Agent shall refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow hereunder until it shall be directed otherwise in writing by all of the surviving parties hereto or by a final order or judgment of an arbitration panel or court of competent jurisdiction, or an award of an arbitrator pursuant to an arbitration conducted pursuant to Section 13 of the Stock Purchase Agreement. (f) The Escrow Agent shall not be required to institute legal proceedings of any kind and shall not be required to initiate or defend any legal proceedings which may be instituted against it in respect of the subject matter of this Agreement, provided that the Escrow Agent shall at all times take such action as is reasonably necessary to keep safely all property held in escrow hereunder. If the Escrow Agent does elect to so act or is required to so act in order to keep safely all property held in escrow hereunder, the Escrow Agent will do so only to the extent that it is indemnified to its reasonable satisfaction against the cost and expense of such defense or initiation. SECTION 8. Liability of Representative. The Representative shall incur no liability with respect to any action taken or suffered by him in his capacity as Representative in reliance upon any note, direction, instruction, consent, statement or other documents believed by him to be genuinely and duly authorized, nor for other action or inaction except his own willful misconduct or gross negligence. The Representative may, in all questions arising under this Escrow Agreement, rely on the advice of counsel and for anything done, omitted or suffered in good faith by the Representative based on such advice, the Representative shall not be liable to anyone. The Representative shall be indemnified and saved harmless by the Acquiree Shareholders from all losses, costs and expenses which he may incur as a result of involvement in any legal proceedings arising from the performance of his duties hereunder. SECTION 9. Amendment. This Agreement may be amended, modified or rescinded by and upon written notice to the Escrow Agent given by RCM, on the one hand, and the Representative, on the other hand; provided that the rights, duties, liabilities, indemnities and immunities of the Escrow Agent hereunder may not be adversely affected at any time without the written consent of the Escrow Agent; and provided further that the interests of the Acquiree Shareholders may not be 6 \PHILA2\99813_4 adversely affected without the written consent of all of the Acquiree Shareholders. SECTION 10. Voting of Escrow Shares. All rights to vote the Escrow Shares while they are part of the Escrow Fund shall be retained by the Acquiree Shareholders. Neither the Representative nor the Acquiree Shareholders shall have any right to transfer or assign their interests in Escrow Shares in the Escrow Fund during such period of time as such Shares remain a part of the Escrow Fund unless RCM shall first have consented thereto in writing and provided that any such transferee shall deliver to the Escrow Agent a duly signed stock power covering such RCM Shares and the Escrow Agent shall hold such transferee's shares and stock powers in escrow subject to this Agreement. SECTION 11. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if sent by certified mail, postage prepaid and return receipt requested, or by hand delivery or by telecopy (promptly confirmed by delivery of an original copy of such notice or communication): (i) If to the Company, to: Mr. Leon Kopyt Chief Executive Officer RCM Technologies, Inc. 2500 McClellan Avenue, Suite 350 Pennsauken, New Jersey 08109-4613 Telephone Number: (609) 486-1777 Telecopy Number: (609) 488-8833 with a copy to: Stephen M. Cohen, Esquire Clark, Ladner, Fortenbaugh & Young One Commerce Square 2005 Market Street, 22nd Floor Philadelphia, PA 19103 Telephone Number: (215) 241-1868 Telecopy Number: (215) 241-1857 (ii) If to the Acquiree Shareholders, to: Barry Meyers 384 Highview Terrace Ridgewood, NJ 07450 Martin Blaire Lewis Road 7 \PHILA2\99813_4 Irvington, NY 10533 with a copy to: Joshua B. Gillon, Esquire Schneck Weltman Hashmall & Mischel LLP 1285 Avenue of the Americas New York, NY 10019 Telephone Number: (212) 956-1500 Telecopy Number: (212) 956-3252 SECTION 12. Parties in Interest. This Agreement shall be binding upon and shall inure to the benefit of the successors and permitted assigns of each of the parties hereto. SECTION 13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 14. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the law of the State of New Jersey applicable to contracts executed and to be performed entirely within said State. SECTION 15. Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof will not in any way be affected or impaired thereby, unless the provisions held invalid shall substantially impair the benefits of the remaining portions of this Agreement. SECTION 16. Consent to Limited Jurisdiction. The Escrow Agent hereby agrees that any legal action or proceeding with respect to disputes arising out of this Agreement not otherwise subject to arbitration under Section 13 of the Stock Purchase Agreement may be brought in the courts of the State of New Jersey or of the United States of America for the District of New Jersey, and, by execution and delivery of this Agreement, the Escrow Agent irrevocably accepts for itself and in respect of the property held by it as Escrow Agent hereunder the jurisdiction of the aforesaid courts, it being understood and agreed that such consent to jurisdiction is for the sole and limited purpose of resolving disputes under this Agreement and shall in no way be 8 \PHILA2\99813_4 deemed to be a general and unconditional consent to the jurisdiction of the aforesaid courts. SECTION 17. Resignation and Removal of Escrow Agent. (a) The Escrow Agent may at any time resign as Escrow Agent hereunder by giving written notice of its resignation to each of the parties hereto, at their respective addresses set forth in Section 11 of this Agreement, at least thirty (30) days prior to the date specified for such resignation to take effect. The Escrow Agent may be removed at any time by an instrument or concurrent instruments in writing delivered to the Escrow Agent and signed by each of the parties hereto (other than the Escrow Agent). (b) If at any time the Escrow Agent shall resign or shall be removed in accordance with the provisions of clause (a) above, RCM and the Representative shall use their respective best efforts to jointly appoint a successor escrow agent under this Agreement. In the event of the resignation or removal of the Escrow Agent, if no appointment of a successor escrow agent shall have been made pursuant to the preceding sentence within the thirty (30) day period referred to in the first sentence of paragraph (a) above, then the retiring Escrow Agent may apply to any court of competent jurisdiction to appoint a successor escrow agent. Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor escrow agent hereunder. SECTION 18. Indemnification. RCM and the Acquiree Shareholders, jointly and severally agree to indemnify, defend and hold the Escrow Agent harmless from and against any and all loss, damage, liability and expense that may be incurred by the Escrow Agent arising out of or in connection with its duties, obligations or performance as Escrow Agent hereunder, except as caused by its negligence or willful misconduct, including without limitation the reasonable legal costs and expenses of defending itself against any claim or liability in connection with its performance hereunder. The terms of this Section 18 shall survive the termination of this Agreement and, with respect to claims arising in connection with the Escrow Agent's duties while acting as such, the resignation or removal of the Escrow Agent. The Escrow Agent agrees to notify RCM and the Representative in writing of the written assertion of a claim against the Escrow Agent or of any suit or proceeding commenced against the Escrow Agent promptly after the Escrow Agent has received any such written assertion of a claim or has been served with the summons or other legal process, in each case giving information as to the nature and basis of the claim, but in no event will the failure to give such notice affect the obligation of RCM to indemnify the Escrow Agent pursuant to this Section 18 unless the rights of RCM and Acquiree Shareholders shall have been materially impaired by such failure. Each of RCM and the Acquiree Shareholders will be entitled to participate at its own expense in the defense of any suit or proceeding brought to enforce any such 9 \PHILA2\99813_4 claim and, if it so elects in writing, may assume the entire defense and control of any such suit or proceeding. Neither RCM nor the Acquiree Shareholders shall be liable for any counsel fees or other expenses incurred by the Escrow Agent after the date that RCM or the Acquiree Shareholders shall have so elected to assume the defense and control of any such suit or proceeding. In addition, neither RCM nor the Acquiree Shareholders shall be liable for any settlement of any such suit, proceeding or claim without the prior written consent of RCM and the Representative. SECTION 19. Third Party Beneficiary Rights. Each Acquiree Shareholder is an intended third party beneficiary of this Agreement and, from and after the Closing Date, each such Acquiree Shareholder shall have the right to enforce its rights and the obligations of each of the other parties to this Agreement to the extent the Representative fails to do so. 10 \PHILA2\99813_4 IN WITNESS WHEREOF, the parties hereto other than the Representative have duly caused this Agreement to be executed, and the Representative has duly executed this Agreement, as of the date first written above. ATTEST: RCM TECHNOLOGIES, INC. By:____________________________ By: __________________________ Name: Title: - -------------------------------- Barry Meyers - -------------------------------- Martin Blaire - ------------------------------- ------------------------------- Escrow Agent Street Address - -------------------------------- City, State, Zip Code Telephone No.___________________ Telefax No._____________________ EX-99 5 INVESTOR REPRESENTATION CERT., DATED 03/11/96 \PHILA2\104116_2 INVESTOR REPRESENTATION CERTIFICATE RCM Technologies, Inc. 2500 McClellan Avenue Suite 350 Pennsauken, New Jersey 08109-4613 Gentlemen: This Certificate is being delivered in connection with a certain Stock Purchase Agreement by and among the undersigned, RCM Technologies, Inc. ("RCM"), and The Consortium ("Acquiree") dated March 1, 1996, pursuant to which RCM has agreed to issue to the undersigned certain shares of its common stock (the "Shares") in consideration for the undersigned's shares of Acquiree. In connection therewith, the undersigned acknowledges and attests to the following, all of which acknowledgements and attestations have been relied upon by RCM in agreeing to sell the Shares to the undersigned pursuant to the Stock Purchase Agreement: (i) except with respect to the rights granted to the undersigned pursuant to the Registration Rights Agreement also entered into on even date herewith, the Shares are not being registered under the Securities Act of 1933, as amended (the "Act") on the basis of the statutory exemption provided by Section (4)2 thereof, relating to transactions not involving a public offering, and that RCM's reliance on the statutory exemption thereof is based in part on the representations made by the undersigned in this Certificate; (ii) the undersigned acknowledges and represents: (a) that he has reviewed such quarterly, annual and periodic reports of RCM as have been filed with the Securities and Exchange Commission (the "Reports") pursuant to the Exchange Act of 1934 and that he has such knowledge and experience in financial and business matters that he is capable of utilizing the information set forth therein, concerning RCM to evaluate the risk of investing in RCM; (b) that he has been advised that the Shares to be issued to him by RCM constitute "restricted securities" as defined in Rule 144 promulgated under the Act, and accordingly, will not be registered under the Act, except as otherwise provided in the Registration Rights Agreement, and, therefore, he may only be able to sell or otherwise dispose of such Shares in accordance with Rule 144, pursuant to an effective Registration Statement or otherwise pursuant to an exemption form registration under the Act; (c) that the Shares so issued are being acquired by him for his own benefit and on his own behalf for investment purposes and not with a view to, or for resale in connection with, a public offering or redistribution thereof; (d) that the Shares so issued will not be resold (i) without registration thereof under the Act (unless in \PHILA2\104116_2 the opinion of counsel acceptable to RCM, an exemption from such registration is available) or (ii) in violation of any law; and (e) that Certificate or Certificates representing the Shares to be issued will be imprinted with a legend in form and substance substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. THE CERTIFICATES REPRESENTING THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS UPON RESALE AND TO THE TERMS AND PROVISIONS OF A STANDSTILL AND SHAREHOLDERS' AGREEMENT DATED MARCH 11, 1996. and RCM is hereby authorized to notify its transfer agent of the status of the Shares and to take such other action including, but not limited to, the placing of a "stop-transfer" order on the transfer agent's books and records to assure compliance with the Securities Act of 1933, as amended. (iii) the undersigned has been afforded the opportunity to review and is familiar with the Reports of RCM and has based his decision to be a party to the Stock Purchase Agreement solely on the information contained therein; (iv) the undersigned is able to bear the economic risks of an investment in the Shares and he represents and warrants that his overall commitment to his investments which are not readily marketable is not disproportionate to his net worth; (v) (a) he is at least 21 years of age; (b) he has adequate means of providing for his current needs and personal contingencies; (c) he has no need for liquidity in his investment in the Shares; (d) he maintains his domicile and is not a transient or temporary resident at the address shown above; and (e) all of his investments and commitments to non-liquid assets and similar investments are, and after his acquisition of the Shares, will be reasonable in relation to his net worth and current needs; (vi) the undersigned understands that no federal or state agency has approved or disapproved the Shares, passed upon or 2 \PHILA2\104116_2 endorsed the merits of the sale of the Shares set forth within the Stock Purchase Agreement or made any finding or determination as to the fairness of the Shares for investment; and (vii) the undersigned recognizes that the Shares of common stock of RCM are presently eligible for trading on The NASDAQ Stock Market-Small Cap Index, however, that RCM has made no representations, warranties or assurances as to the future trading value of the Shares, whether a public market will continue to exist for the resale of the Shares, or whether the Shares can be sold at a price reflective of past trading history at any time in the future. IN WITNESS WHEREOF, the undersigned has executed this Investor Representation Certificate on this 11th day of March, 1996. - ------------------------- -------------------------------- Witness 3 EX-99 6 STANDSTILL AND SHAREHOLDERS AGREE., DATED 03/11/96 \PHILA2\99917_4 STANDSTILL AND SHAREHOLDERS' AGREEMENT This Agreement dated as of March 11, 1996, between each of the persons identified on Schedule A hereto (the "Holders") and RCM Technologies, Inc., a Nevada corporation (the "Company"). R E C I T A L S: WHEREAS, the Company and Holders are parties to a Stock Purchase Agreement dated as of March 1, 1996 (the "Stock Purchase Agreement") pursuant to which the Company acquired 100% of the outstanding stock of The Consortium, a New Jersey corporation (the "Acquiree"); WHEREAS, the Holders represent the former holders of 100% of the outstanding capital stock of Acquiree; WHEREAS, as a result of a closing under the Stock Purchase Agreement, Holders acquired 6,500,000 shares of the Common Stock of the Company (the "RCM Shares"); WHEREAS, the parties desire to set forth certain agreements concerning the RCM Shares and other matters. NOW, THEREFORE, the parties hereto agree as follows: AGREEMENT 1. Definitions (a) "Acquiree" shall mean The Consortium, a New Jersey corporation. (b) "Company" shall mean RCM Technologies, Inc., a Nevada corporation. (c) "Holders" shall mean the former shareholders of The Consortium all of whom received RCM Shares pursuant to the Stock Purchase Agreement. (d) "Stock Purchase Agreement" shall mean that agreement entered into as of March 1, 1996, among the Company, the Holders and Acquiree. (e) "Voting Securities" shall mean all classes of capital stock of the Company which are then entitled to vote generally in the election of directors of the Company. Unless otherwise indicated herein, any capitalized terms utilized in this Agreement shall have the meaning ascribed thereto in the Stock Purchase Agreement. \PHILA2\99917_4 2. Covenants of Holders (a) During the term identified in subparagraph (b) below: (i) Each of the Holders shall vote all Voting Securities owned by him in connection with the election of directors of the Company for all of the nominees of a majority of the Board of Directors of the Company and, unless the Company otherwise consents in writing, on all other matters to be voted on by the holders of Voting Securities, in accordance with the recommendation of the majority of the Board of Directors; provided that the Voting Securities owned by Holders may be voted as such members determine in their sole discretion on any Significant Event. As used herein, the term "Significant Event" means any (A) sale of substantially all of the assets of the Company; (B) acquisition of the Company by a third party through a merger transaction in which the Company is the target company; or (C) transaction or series of related transactions which results in the issuance and/or sale by the Company of more than 20% of the outstanding capitalization on a fully diluted basis, if that on a proforma basis, the proportionate net stockholders' equity of the Holders after such proposed transaction would be diluted. The Holders, as holders of Voting Securities, shall be present, in person or by proxy, at all meetings of shareholders of the Company so that all Voting Securities beneficially owned by them may be counted for the purpose of determining the presence of a quorum at such meetings. (ii) No Holder shall deposit any Voting Securities in a voting trust or subject any Voting Securities to any arrangement or agreement with respect to the voting of such Voting Securities, except in connection with a transfer permitted under 2(a)(v)(D). (iii) No Holder shall solicit proxies or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act) in opposition to the recommendation of the majority of the Board of Directors of the Company with respect to any matter. (iv) No Holder shall join a partnership, limited partnership, limited liability company, limited liability partnership, syndicate or other group or otherwise act in concert with any person, for the purpose of acquiring, holding, voting or disposing of Voting Securities, or otherwise become a "person" within the meaning of Section 13(d)(3) of the Exchange Act, other than with other Holders. (v) In addition to the limitations upon public 2 \PHILA2\99917_4 resale contained in Section 2(c) of the Registration Rights Agreement executed on even date herewith by and among the Company and the Holders (the "Registration Rights Agreement"), no Holder shall, directly or indirectly, offer or sell or transfer any Voting Securities except (A) to another Holder; (B) in gift or other similar transactions not involving sales for consideration, to family members or trusts, provided, however, that such family members (or trustee) as a condition to such transfer agree in writing to be bound by the terms of this Agreement as if they were a Holder; (C) in other transactions in which Voting Securities are sold or transferred to any person or related group of persons who would immediately thereafter, to the knowledge of any Holder, own, or have the right to acquire Voting Securities representing no more than one percent of the total combined voting power of all Voting Securities then outstanding; or (D) as a result of any pledge or hypothecation to a financial institution to secure a bona fide loan, or the foreclosure of any lien or encumbrance which might be placed upon any Voting Securities (whether voluntarily or involuntarily). (b) The covenants identified in Section 2(a)(i)-(v) shall continue in full force and effect until the earlier of (i) the date upon which Leon Kopyt no longer serves as an officer of the Company; or (ii) six (6) months following the date upon which both Messrs. Blaire and Meyers cease to be employees of the Company (the "Termination Date"), provided, however, that the Termination Date shall be deemed to occur on any such earlier date that the employment of both of Messrs. Blaire and Meyers is terminated without cause. 3. Covenants Regarding Board Representation (a) Effective April 15, 1996, the Company shall (i) increase its Board of Directors from five (5) members to seven (7) members; (ii) appoint Messrs. Blaire and Meyers to such openings as a Class C and Class A member, respectively; and (iii) appoint Messrs. Blaire and Meyers to the Executive Committee of the Board of Directors of the Company. (b) The Company shall (i) continue to nominate Messrs. Blaire and Meyers as management nominees for election to the Board of Directors upon expiration of their respective terms and (ii) cause Messrs. Blaire and Meyers to be appointed to the Executive Committee of the Board of Directors, for so long as: (A) the Holders, in the aggregate, continue to own, directly or beneficially, 50% or more of the RCM Shares (as adjusted by any stock splits, recapitalization or other adjustments to the capital stock of the Company), and (B) either of Messrs. Blaire or Meyers remain as a management level employee of the Company; provided, 3 \PHILA2\99917_4 however, that: (X) in the event only one of Messrs. Blaire or Meyers is a management level employee, then only that individual shall be entitled to the rights set forth in clauses (i) and (ii) hereof; and (Y) the provisions of clause (B) above shall not be effective to abrogate the Company's obligations in clauses (i) and (ii) above if the employment of either or both of Messrs. Blaire and Meyers is terminated by the Company without cause; in which case the Company shall remain obligated to undertake those actions identified in clauses (i) and (ii) hereof for the remaining period of any employment agreements pursuant to which Messrs. Blaire or Meyers were employed upon such termination. 4. Negative Covenant The Company shall not undertake the corporate actions described below without the written consent of either of Messrs. Blaire or Meyers: (a) the sale of all or substantially all of the assets of the Company on a consolidated basis; (b) the acquisition of the Company by a third party through a merger transaction in which the Company is the target Company; or (c) a transaction or series of related transactions that result in the issuance and/or sale by the Company of more than 20% of its outstanding capital stock of the Company outstanding at that time, if, on a proforma basis, the proportionate net stockholders' equity of the Holders immediately after the completion of such proposed transaction would be diluted. Notwithstanding the foregoing, no such written consent shall be required if: (i) the Holders, in the aggregate, own, directly or beneficially, less than 50% of the RCM Shares (subject to adjustment for stock splits, recapitalization or other adjustments to the capital stock of the Company); or (ii) neither Messrs. Blaire nor Meyers, nor their designees continue to serve on the Board of Directors of the Company; or (iii) the Holders, in the aggregate, own beneficially less than 15% of the outstanding capital stock of the Company. 5. Termination of Prior Shareholders Agreements - Release of Acquiree (a) The execution of this Agreement by the Holders shall constitute the formal termination of any and all prior shareholders agreements or arrangements in their former capacity as holders of the common stock of Acquiree, including, but not limited to: (i) 4 \PHILA2\99917_4 Employee Shareholder Agreement dated July 6, 1995 between Acquiree and Alexander Valcic; (ii) Employee Shareholder Agreement dated June 29, 1995 between Acquiree and Howard Ross; (iii) Employee Shareholder Agreement dated June 30, 1995 between Acquiree and Marie Wolfson; and (iv) Shareholders Agreement dated September 25, 1992 between Acquiree, Martin L. Blaire and Barry S. Meyers, all as amended or supplemented from time to time. (b) Each of the Holders, individually, do hereby remise, release and forever discharge Acquiree, as well as each of its directors and officers (the "Releasees") of and from any and all manner of actions, causes of action, suits, debts, accounts, bonds, covenants, agreements, understandings, contracts, controversies, judgments, damages, claims, liabilities and demands of any kind or nature whatsoever, at law or in equity, including but not limited to those matters arising under any and all Shareholders Agreements or similar arrangements with Acquiree, whether such be presently known or unknown, which against any of the Releasees the Holders ever had, now have or hereafter can have or may claim to have for or by reason of any cause, matter or thing whatsoever, from the beginning of the world to the date hereof; provided, however, notwithstanding the foregoing, the Holders do not release the Acquiree from its obligations to indemnify and hold harmless each Holder, under the Certificate of Incorporation of Acquiree (as amended) or as otherwise contemplated by the New Jersey Business Corporation Act, for any liabilities incurred by them in their capacity as an officer and/or director of the Acquiree. 6. Restrictive Covenants (a) In recognition of their continued employment with Acquiree following the Closing under the Stock Purchase Agreement, each of Alexander Valcic, Howard Ross and Marie Wolfson (in the aggregate, the "Non-Executive Employee") do hereby agree to comply with the restrictive covenants set forth in subparagraph 6(a)(i) and (ii), for the one (1) year period following the termination of such Non-Executive Employee, if a termination of such Non-Executive Employee occurs within the two (2) year period following the Closing. In the event a Non-Executive Employee is not terminated within the two (2) year period following Closing, then such Non Executive Employee and the Company shall conduct negotiations in good faith to determine an appropriate non-competition period for the Non-executive Employee. (i) The Non-Executive Employee shall not engage, directly or indirectly, whether as owner, partner, joint venturer, shareholder, director, employee, agent, consultant, advisor, officer or otherwise, in any other business or enterprise which is in direct competition with the Company; provided, however, that (i) 5 \PHILA2\99917_4 with respect to Alexander Valcic, such non-competition shall only apply to the computer consulting industry and the business of the permanent placement of computer personnel in the greater New York metropolitan area and (ii) with respect to Howard Ross, such non competition shall only apply to the placement of general temporary personnel in the greater New York metropolitan area. (ii) The Non-Executive Employee shall not as owner, partner, joint venturer, shareholder, director, employee, agent, consultant, advisor, officer or otherwise, directly or indirectly: (A) engage in business with, solicit the business of, contract with, or otherwise do business with, or cause any entity with which the Non-Executive Employee is associated to engage, solicit, contract or otherwise do business with, in respect of business which is in direct or indirect competition with the business then conducted by the Company, any persons or entities who, at the time of such termination are, or at any time within the period of six (6) months prior to such termination were, a party to an engagement letter or agreement with, or who were otherwise clients of the Company, or (B) employ as an employee, engage as an independent contractor, or otherwise retain or solicit, or seek to so employ, engage or retain, any person who is at such time, or was during any portion of the six (6) months prior to the termination of the Non Executive Employee's employment by the Company, an employee of, or an independent contractor for the Company. Notwithstanding the foregoing, however, each of the Non-Executive Employees may make passive investments of not more that 5% of the total issued and outstanding securities of any corporation which competes with the Company and whose securities are regularly traded on any national securities exchange or in the over-the-counter market. (b) At all times, both during and after the Non Executive Employee is a stockholder of the Company, such Non Executive Employee shall be deemed to be in a fiduciary capacity for the benefit of the Company, and not use or disclose to any third party, any trade secret, information, knowledge or data not generally known to, or easily obtainable by, the public which the Non-Executive Employee may have learned, discovered, developed, conceived, originated or prepared during or as a result of the Non Executive Employee's relationship with the Company, with respect to the operations, business, affairs, products, technologies or services of the Company. (c) If in any proceeding, a Court shall refuse to enforce any covenant in this Paragraph 6 because such covenant covers too extensive a geographic area or too long a period of time or for any other reason, any such covenant shall be deemed amended to the extent (but only to the extent) required by law, and shall be enforced as amended. 6 \PHILA2\99917_4 (d) In the event a Non-Executive Employee violates any of the covenants in this Paragraph 6, the Company shall be deemed to have suffered irreparable harm, and shall be entitled to seek and obtain equitable relief in the form of temporary restraining orders and preliminary injunctions to enforce said covenants. In such event, such Non-Executive Employee hereby waives the claim or defense that an adequate remedy exists at law and shall not advance in any such action or proceeding the claim or defense that such remedy at law exists. Such remedy shall be in addition to any other remedy available at law or in equity. Furthermore, in the event of such breach, such Non-Executive Employee shall be liable for all of the costs and expenses, including, but not limited to reasonable legal fees, in obtaining such equitable relief. 7. Right of First Refusal (a) In the event that a Holder proposes to dispose in a privately negotiated transaction effectuated other than (i) by means of a public resale, (ii) to another Holder or (iii) to a family member, any or all of the RCM Shares ("Selling Shares") then owned by such Holder (the "Selling Holder"), then the Selling Holder shall provide written notice to the Company of his intention (the "Selling Notice") to dispose of his Selling Shares. The Selling Notice shall contain the terms upon which such proposed disposition shall occur, including the amount and price per share of the Selling Shares. Upon receipt of the Selling Notice, the Company shall have the option for a period of eleven (11) calendar days (the "Option Period") to purchase the Selling Shares offered in the Selling Notice on the same terms and conditions set forth therein. The Selling Holder, upon the earlier of receiving written notification from the Company that it elects not to purchase the Selling Shares or the expiration of the Option Period, may dispose of all, but not less than all, of the Selling Shares identified in the Selling Notice, on the same terms and conditions as are set forth in the Selling Notice. In the event the Selling Holder intends to dispose of the Selling Shares on terms different from those presented to the Company in the Selling Notice, or the Selling Holder does not dispose of the Selling Shares within ninety (90) calendar days from the date of receipt by the Company of the Selling Notice, then the Selling Shares shall once again be subject to all of the terms and provisions of this Section 7. (b) In the event that a Holder proposes to dispose of the Selling Shares in an open market transaction, the Selling Holder shall provide a Selling Notice to the Company. Upon receipt of the Selling Notice, the Company shall have the option for one (1) calendar day to purchase the Selling Shares offered in the Selling Notice upon the terms and conditions set forth therein. 7 \PHILA2\99917_4 8. Preemptive Rights If RCM issues any Voting Securities for cash (other than pursuant to employee stock option plans or in an underwritten public offering), then the Acquiree Shareholders shall have the right to purchase, on the same terms as such issuance, that number of Voting Securities so that the Acquiree Shareholders own the same percentage of the Company's Voting Securities as they owned immediately prior to such issuance. 9. Miscellaneous (a) The Holders, on one hand, and the Company, on the other acknowledge and agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any Court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which they maybe entitled at law or in equity. (b) If requested in writing by the Company, the Holders shall present or cause to present promptly all certificates representing Voting Securities now owned or hereafter acquired by members of the Holder Group for the placement thereon of the following legend, which will remain thereon as long as such Voting Securities are subject to the restrictions contained in this Agreement, and which will be in addition to any legend that denotes the securities as "restricted securities" under the Securities Act of 1933, as amended; "The securities represented by this certificate are subject to the provisions of an agreement dated as of March 1, 1996 between RCM Technologies, Inc. and the persons identified in such agreement and may not be sold or transferred except in accordance therewith. A copy of said agreement is on file at the offices of the corporate secretary of RCM Technologies, Inc." The Company may enter a stop transfer order with the transfer agent or agents of Voting Securities against the transfer of Voting Securities except in compliance with the requirements of this Agreement. The Company agrees to remove promptly any stop transfer order with respect to, and issue promptly an legend and certificates in substitution for, certificates of any Voting 8 \PHILA2\99917_4 Securities that are no longer subject to the restrictions contained in this Agreement. (c) As used herein, the term "affiliate" shall have the meaning set forth in Rule 12b-2 under the Exchange Act and the term "person" shall mean any individual, partnership, corporation, trust, limited liability company, or other entity. (d) This Agreement contains the entire understanding of the parties with respect to the transaction contemplated hereby and the Agreement maybe terminated only by an agreement in writing executed by the parties hereto. (e) Descriptive headings are for the convenience only and shall not control or affect the meaning or construction or any provision of this Agreement. (f) For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto, and each such executed counterpart shall be, and shall be deemed to be, an original instrument. (g) All notices (including a Selling Notice), consents, and requests, instructions, approvals and other communications provided for herein and all legal processing in regard hereto shall be valid if given, made or served, if in writing and delivered personally, by facsimile, or sent by registered mail, postage prepaid (i) If to the Company, to: Mr. Leon Kopyt Chief Executive Officer RCM Technologies, Inc. 2500 McClellan Avenue, Suite 350 Pennsauken, New Jersey 08109-4613 with a courtesy copy to; Stephen M. Cohen, Esq. Clark Ladner Fortenbaugh & Young One Commerce Square 2005 Market Street Philadelphia, Pennsylvania 19103 Telephone Number: (215) 241-1800 Telecopy Number: (215) 241-1857 (ii) If to the Holders, to: 9 \PHILA2\99917_4 Martin Blaire Lewis Road Irvington Road, NY 10533 Barry Meyers 384 Highview Terrace Ridgewood, NJ 07450 Howard Ross 1260 Westover Road Stamford, CT 06902 Marie Wolfson 210 Marc Boulevard Boonton, NJ 07005 Alexander Valcic 412 East 55th Street New York, NY 10022 with a courtesy copy to; Joshua B. Gillon, Esquire Schneck Weltman Hashmall & Mischel LLP 1285 Avenue of the Americas 10 \PHILA2\99917_4 New York, New York 10019 Telephone Number: (212) 956-1500 Telecopy Number: (212) 956-3252 Any such notices shall be effective (i) when delivered in person or sent by telecopy, (ii) one business day after being sent by overnight delivery or (iii) 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. (h) From and after the Termination Date or earlier termination of this Agreement, the covenants of the parties set forth herein shall be of no further force and effect and the parties shall be under no further obligation with respect thereto. (i) This Agreement shall be governed by construed and forced in accordance with the laws of the State of New Jersey applicable to contracts made and to be performed therein. 11 \PHILA2\99917_4 IN WITNESS WHEREOF, the Holders and the Company have caused this Agreement to be duly executed, in the case of accompanied by its respective officers, each of who is duly authorized, all as of the day and year first above written. RCM TECHNOLOGIES, INC. ATTEST By: By: Secretary Name: Title: THE HOLDERS: Martin Blaire Barry Meyers Howard Ross Marie Wolfson Alexander Valcic For the purpose of consenting to, and joining with the provisions of Paragraph 5(a) hereof: THE CONSORTIUM ATTEST By:________________________ By:________________________ Secretary Name:________________ Title:_______________ \PHILA2\99917_4 SCHEDULE A Martin Blaire Barry Meyers Howard Ross Marie Wolfson Alexander Valcic 13 EX-99 7 EMPLOYMENT & NONCOMPETITION AGREEMENT \PHILA2\99807_2 EMPLOYMENT AND NON-COMPETITION AGREEMENT AGREEMENT made as of this 11th day of March, 1996, by and between RCM TECHNOLOGIES, INC., a Nevada corporation (hereafter "Employer") and MARTIN BLAIRE (hereafter "Employee"). In consideration of the mutual promises herein contained and intending to be legally bound hereby, the parties agree as follows: 1. EMPLOYMENT: Employer hereby employees Employee and Employee accepts employment upon the terms and conditions of this Agreement. 2. TERM: The term of the employment pursuant to this Agreement (the "Employment Term") shall be for two (2) years commencing March 11, 1996, and terminating March 11, 1998. 3. DUTIES: Employee shall (a) have the title of Executive Vice President and (b) devote his full time, attention and best efforts to his duties as Executive Vice-President. Employee's principal place of business shall be in the greater New York metropolitan area, subject to the reasonable travel requirements of his position. Employee shall at all times discharge his duties in \PHILA2\99807_2 consultation with and under the supervision of the Chief Executive Officer of Employer. 4. COMPENSATION: For all services to be rendered by Employee hereunder, Employer shall pay to Employee a salary of $240,000 per annum, to be paid in accordance with the general payroll practices of the Employer as from time to time in effect. Employee shall also be entitled, subject to the terms and conditions of particular plans and programs, to all fringe benefits afforded to other executives of Employer, including, but not by way of limitation, the right to participate in any pension, stock option, retirement, major medical, group health, disability, accident and life insurance, car allowances, bonuses and other employee benefit programs made generally available, from time to time, by the Employer. 5. VACATIONS, HOLIDAYS, ILLNESS, DISABILITY: (a) Employee shall receive four (4) weeks of paid vacation in each calendar year, to be taken at times which do not unreasonably interfere with the performance of the Employee's duties hereunder. Any unused vacation time from any fiscal year shall be subject to accumulation or forfeiture in accordance with the policy of Employer as in effect from time to time. (b) Employee shall be entitled to those holidays allowed for by Company policy. (c) If Employee is prevented from performing his duties by reason of illness or incapacity for an aggregate of thirty (30) days in any year of this Agreement, Employer shall not be obligated to pay Employee compensation for any period of absence in excess of -2- \PHILA2\99807_2 the aggregate of thirty (30) days in any year. Sick pay shall be non-cumulative and, to the extent not used, shall not be paid to Employee. (d) If Employee is prevented from performing his duties by reason of verifiable physical or mental illness or incapacity for a continuous period of ninety (90) days, then Employer, in addition to the remedy provided for in subparagraph (c) hereof, may on fifteen (15) days prior notice, terminate Employee's employment. Employer shall include Employee in such disability insurance coverage as Employer provides for executive level employees of Employer. 6. TERMINATION: (a) Notwithstanding any other provision hereof, the employment of Employee shall terminate immediately upon the death of Employee or Employee's discharge by Employer for "good and sufficient cause" (as defined below). In the event of Employee's death while employed by Employer, Employer will pay Employee's named beneficiary, or if there be none then living, to his estate, Employee's base salary at the date of his death for a period of six (6) months after the date of death, payable weekly. (b) "Good and sufficient cause" shall mean: (i) a material breach of this Agreement which has not been cured within 15 days of written notice thereof; or (ii) action or behavior reasonably expected to have a material adverse effect on the reputation of -3- \PHILA2\99807_2 Employer, including acts of moral turpitude or dishonesty. (c) If Employee is terminated for "good and sufficient cause", then Employer shall provide Employee, upon termination, a written explanation for such termination, identifying such "good and sufficient cause." 7. EXPENSES: During the Employment Term, Employer agrees to pay all reasonable expenses incurred by Employee in furtherance of the business of Employer including travel and entertainment expense. Employer agrees to reimburse Employee for any such expenses upon submission by him of a statement itemizing such expenses. 8. MEDICAL INSURANCE: During the Employment Term, Employer shall pay for and include Employee and his family in the medical insurance coverage provided for executive management of Employer. 9. NON-DISCLOSURE/NON-COMPETITION: (a) For the purposes of this Section 9, the term "Employer" shall mean Employer and all of its subsidiaries and affiliates. Employee will not, during or at any time after termination of employment hereunder, without authorization of Employer, disclose to, or make use of for himself or for any person, corporation, or other entity, any trade secret or other confidential information concerning the business, clients, methods, operations, financing or services of Employer. Trade secrets and confidential information shall mean information disclosed to Employee or known by him as a consequence of his employment by -4- \PHILA2\99807_2 Employer, whether or not pursuant to this Agreement, 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 Employer and all technical information relating to products or systems developed or being developed by Employer and all planned product or system improvements or changes to the extent not generally known to the industry. It shall not be a breach of this Section 9 if Employee discloses information that is already generally known to the public or if Employee is required to disclose such information by law or court order. (b) Employee agrees that he will not, directly or indirectly, during the Employment Term and for a period of one (1) year thereafter, within the geographic areas in which Employer conducts its operations upon the termination of his employment, engage in the business of placement of technical or temporary personnel, whether as an employee, owner, partner, agent, director, officer of shareholder and, without limiting the generality of the foregoing, do any of the following: (i) Solicit, divert, accept business from or otherwise take away any client of Employer who is or was a client during the Employment Term, including all clients directly or indirectly produced or generated by Employee; (ii) Solicit, induce or contract with any of the Employer's employees to leave Employer or to work for Employee or any company with which Employee is connected; or -5- \PHILA2\99807_2 (iii) Solicit, divert or take away any of Employer's sources of business. (c) If Employee is terminated, prior to the expiration of the Employment Term, without "good and sufficient cause", as such term is defined in Paragraph 6(b), then the non-competition period shall remain in effect during the term of employment plus the six (6) month period following the date Employee was terminated without "good and sufficient cause." (d) Notwithstanding the provisions contained in this Section 9, Employee shall have the right to beneficially own no more than five percent (5%) of the stock of a public company which is a competitor of Employer. 10. REMEDIES: Employee agrees that a violation of any of the provisions of paragraph 9 hereof will cause irreparable damage to Employer the exact amount of which it will be impossible to ascertain and, for that reason, Employee agrees that Employer shall be entitled to injunctive relief restraining any violation of paragraph 9 hereby by Employee and any person, firm or corporation associated with him, such right to be cumulative and in addition to all other remedies available to Employer by reason of such violation. 11. SEVERANCE: Upon the earlier of the expiration of the Employment Term or the date, if at all, Employee is otherwise terminated without "good and sufficient cause" (the "Expiration Date"), Employee shall be entitled to continue to receive a salary at the level of his existing salary as of the Expiration Date for the one (1) year -6- \PHILA2\99807_2 period following the Expiration Date. In the event Employee is terminated with "good and sufficient cause", Employee shall not be entitled to any amounts under this Paragraph 11. 12. ARBITRATION: Except for matters arising under paragraphs 9, 10 and 11 hereof, any controversy, claim or dispute arising out of or relating to this Agreement, shall be submitted to arbitration in the City of Princeton, State of New Jersey, in accordance with the rules of the American Arbitration Association; the expenses of the arbitration shall be paid equally by Employer and Employee. Any judgment upon the award made and rendered by the arbitration may be entered in a Court of competent jurisdiction. 13. CHOICE OF LAW: This Agreement shall be governed by the law of the State of New Jersey without regard to conflicts of law principles. 14. NOTICES: Any notice required or permitted to be given under this Agreement shall be sufficient if in writing, and if sent by certified mail, return receipt requested, as follows: IF TO EMPLOYEE: Martin Blaire Lewis Road Irvington, NY 10533 IF TO EMPLOYER: RCM Technologies, Inc. 2500 McClellan Avenue, Suite 350 Pennsauken, NJ 08109-4613 -7- \PHILA2\99807_2 15. BINDING EFFECT: The terms of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective personal representatives, successors and assigns. 16. INTEGRATION-AMENDMENT: This Agreement contains the entire agreement between the parties hereto, with respect to the transactions contemplated herein and supersedes all previous representation, negotiations, commitments and writings with respect thereto. No amendment or alteration of the terms of this Agreement shall be valid unless made in writing and signed by all parties hereto. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. RCM TECHNOLOGIES, INC. BY: ATTEST: MARTIN BLAIRE -8- \PHILA2\104618_1 EMPLOYMENT AND NON-COMPETITION AGREEMENT AGREEMENT made as of this 11th day of March, 1996, by and between RCM TECHNOLOGIES, INC., a Nevada corporation (hereafter "Employer") and BARRY MEYERS (hereafter "Employee"). In consideration of the mutual promises herein contained and intending to be legally bound hereby, the parties agree as follows: 1. EMPLOYMENT: Employer hereby employees Employee and Employee accepts employment upon the terms and conditions of this Agreement. 2. TERM: The term of the employment pursuant to this Agreement (the "Employment Term") shall be for two (2) years commencing March 11, 1996, and terminating March 11, 1998. 3. DUTIES: Employee shall (a) have the title of Chief Operating Officer and (b) devote his full time, attention and best efforts to his duties as Chief Operating Officer. Employee's principal place of business shall be in the greater New York metropolitan area, subject to the reasonable travel requirements of his position. Employee shall at all times discharge his duties in consultation \PHILA2\104618_1 with and under the supervision of the Chief Executive Officer of Employer. 4. COMPENSATION: For all services to be rendered by Employee hereunder, Employer shall pay to Employee a salary of $240,000 per annum, to be paid in accordance with the general payroll practices of the Employer as from time to time in effect. Employee shall also be entitled, subject to the terms and conditions of particular plans and programs, to all fringe benefits afforded to other executives of Employer, including, but not by way of limitation, the right to participate in any pension, stock option, retirement, major medical, group health, disability, accident and life insurance, car allowances, bonuses and other employee benefit programs made generally available, from time to time, by the Employer. 5. VACATIONS, HOLIDAYS, ILLNESS, DISABILITY: (a) Employee shall receive four (4) weeks of paid vacation in each calendar year, to be taken at times which do not unreasonably interfere with the performance of the Employee's duties hereunder. Any unused vacation time from any fiscal year shall be subject to accumulation or forfeiture in accordance with the policy of Employer as in effect from time to time. -2- \PHILA2\104618_1 (b) Employee shall be entitled to those holidays allowed for by Company policy. (c) If Employee is prevented from performing his duties by reason of illness or incapacity for an aggregate of thirty (30) days in any year of this Agreement, Employer shall not be obligated to pay Employee compensation for any period of absence in excess of the aggregate of thirty (30) days in any year. Sick pay shall be non-cumulative and, to the extent not used, shall not be paid to Employee. (d) If Employee is prevented from performing his duties by reason of verifiable physical or mental illness or incapacity for a continuous period of ninety (90) days, then Employer, in addition to the remedy provided for in subparagraph (c) hereof, may on fifteen (15) days prior notice, terminate Employee's employment. Employer shall include Employee in such disability insurance coverage as Employer provides for executive level employees of Employer. 6. TERMINATION: (a) Notwithstanding any other provision hereof, the employment of Employee shall terminate immediately upon the death of Employee or Employee's discharge by Employer for "good and sufficient cause" (as defined below). In the event of Employee's death while employed by Employer, Employer will pay Employee's named beneficiary, or if there be none then living, to his estate, Employee's base salary at the date of his death for a period of six (6) months after the date of death, payable weekly. -3- \PHILA2\104618_1 (b) "Good and sufficient cause" shall mean: (i) a material breach of this Agreement which has not been cured within 15 days of written notice thereof; or (ii) action or behavior reasonably expected to have a material adverse effect on the reputation of Employer, including acts of moral turpitude or dishonesty. (c) If Employee is terminated for "good and sufficient cause", then Employer shall provide Employee, upon termination, a written explanation for such termination, identifying such "good and sufficient cause." 7. EXPENSES: During the Employment Term, Employer agrees to pay all reasonable expenses incurred by Employee in furtherance of the business of Employer including travel and entertainment expense. Employer agrees to reimburse Employee for any such expenses upon submission by him of a statement itemizing such expenses. -4- \PHILA2\104618_1 8. MEDICAL INSURANCE: During the Employment Term, Employer shall pay for and include Employee and his family in the medical insurance coverage provided for executive management of Employer. 9. NON-DISCLOSURE/NON-COMPETITION: (a) For the purposes of this Section 9, the term "Employer" shall mean Employer and all of its subsidiaries and affiliates. Employee will not, during or at any time after termination of employment hereunder, without authorization of Employer, disclose to, or make use of for himself or for any person, corporation, or other entity, any trade secret or other confidential information concerning the business, clients, methods, operations, financing or services of Employer. Trade secrets and confidential information shall mean information disclosed to Employee or known by him as a consequence of his employment by Employer, whether or not pursuant to this Agreement, 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 Employer and all technical information relating to products or systems developed or being developed by Employer and all planned product or system improvements or changes to the extent not generally known to the industry. It shall not be a breach of this Section 9 if Employee discloses information that is already generally known to the public or if Employee is required to disclose such information by law or court order. -5- \PHILA2\104618_1 (b) Employee agrees that he will not, directly or indirectly, during the Employment Term and for a period of one (1) year thereafter, within the geographic areas in which Employer conducts its operations upon the termination of his employment, engage in the business of placement of technical or temporary personnel, whether as an employee, owner, partner, agent, director, officer of shareholder and, without limiting the generality of the foregoing, do any of the following: (i) Solicit, divert, accept business from or otherwise take away any client of Employer who is or was a client during the Employment Term, including all clients directly or indirectly produced or generated by Employee; (ii) Solicit, induce or contract with any of the Employer's employees to leave Employer or to work for Employee or any company with which Employee is connected; or (iii) Solicit, divert or take away any of Employer's sources of business. (c) If Employee is terminated, prior to the expiration of the Employment Term, without "good and sufficient cause", as such term is defined in Paragraph 6(b), then the non-competition period shall remain in effect during the term of employment plus the six (6) month period following the date Employee was terminated without "good and sufficient cause." (d) Notwithstanding the provisions contained in this Section 9, Employee shall have the right to beneficially own no -6- \PHILA2\104618_1 more than five percent (5%) of the stock of a public company which is a competitor of Employer. 10. REMEDIES: Employee agrees that a violation of any of the provisions of paragraph 9 hereof will cause irreparable damage to Employer the exact amount of which it will be impossible to ascertain and, for that reason, Employee agrees that Employer shall be entitled to injunctive relief restraining any violation of paragraph 9 hereby by Employee and any person, firm or corporation associated with him, such right to be cumulative and in addition to all other remedies available to Employer by reason of such violation. 11. SEVERANCE: Upon the earlier of the expiration of the Employment Term or the date, if at all, Employee is otherwise terminated without "good and sufficient cause" (the "Expiration Date"), Employee shall be entitled to continue to receive a salary at the level of his existing salary as of the Expiration Date for the one (1) year period following the Expiration Date. In the event Employee is terminated with "good and sufficient cause", Employee shall not be entitled to any amounts under this Paragraph 11. 12. ARBITRATION: Except for matters arising under paragraphs 9, 10 and 11 hereof, any controversy, claim or dispute arising out of or relating to this Agreement, shall be submitted to arbitration in the City of Princeton, State of New Jersey, in accordance with the rules of the American Arbitration Association; the expenses of the -7- \PHILA2\104618_1 arbitration shall be paid equally by Employer and Employee. Any judgment upon the award made and rendered by the arbitration may be entered in a Court of competent jurisdiction. 13. CHOICE OF LAW: This Agreement shall be governed by the law of the State of New Jersey without regard to conflicts of law principles. 14. NOTICES: Any notice required or permitted to be given under this Agreement shall be sufficient if in writing, and if sent by certified mail, return receipt requested, as follows: IF TO EMPLOYEE: Barry Meyers 384 Highview Terrace Ridgewood, NJ 07450 IF TO EMPLOYER: RCM Technologies, Inc. 2500 McClellan Avenue, Suite 350 Pennsauken, NJ 08109-4613 15. BINDING EFFECT: The terms of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective personal representatives, successors and assigns. 16. INTEGRATION-AMENDMENT: This Agreement contains the entire agreement between the parties hereto, with respect to the transactions contemplated herein and supersedes all previous representation, negotiations, commitments and writings with respect thereto. No amendment or alteration of the terms of this Agreement shall be valid unless made in writing and signed by all parties hereto. -8- \PHILA2\104618_1 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. RCM TECHNOLOGIES, INC. BY: ATTEST: BARRY MEYERS -9- -----END PRIVACY-ENHANCED MESSAGE-----