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ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") dated as of March 11, 1996 among
RCM TECHNOLOGIES, INC., a Nevada corporation ("RCM"), XXXXXX XXXXXX and XXXXX
XXXXXX (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.
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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
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(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
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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.
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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.
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(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
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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:
Xx. Xxxx Xxxxx
Chief Executive Officer
RCM Technologies, Inc.
0000 XxXxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxx, Esquire
Clark, Ladner, Xxxxxxxxxxx & Young
One Commerce Square
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
(ii) If to the Acquiree Shareholders, to:
Xxxxx Xxxxxx
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxx
Xxxxx Road
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Xxxxxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxxx, Esquire
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
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
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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
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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.
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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:
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Xxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
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Escrow Agent Street Address
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City, State, Zip Code
Telephone No.___________________
Telefax No._____________________
