UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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RCM TECHNOLOGIES, INC.
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(Name of Registrant as Specified in Its Charter)
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RCM Technologies
The Source of Smart Solutions
SOLUTIONS:
RCM TECHNOLOGIES, INC. ----------------
2500 McClellan Avenue o Business
Pennsauken, NJ 08109 ----------------
o Technology
Tel: 856.486.1777 ----------------
Fax: 856.488.8833 o Resource
info@rcmt.com ----------------
www.rcmt.com
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 2006
--------------------
To Our Stockholders:
The RCM Technologies, Inc. 2006 Annual Meeting of Stockholders will be held
at the law offices of Morgan, Lewis & Bockius LLP, 1701 Market Street,
Philadelphia, Pennsylvania 19103, on Thursday, June 15, 2006, at 6:00 p.m. local
time.
The purposes of the meeting are to:
1. Elect one Class A director, to serve until his term expires and until
his successor is elected and qualified;
2. Consider and approve adoption of the Company's 2006 Omnibus Equity
Compensation Plan;
3. Ratify our Audit Committee's appointment of Grant Thornton LLP as our
independent accountants for our fiscal year ending December 30, 2006; and
4. Transact such other business as may properly come before the meeting
or any adjournment(s) of the meeting.
We have fixed April 20, 2006 as the record date for determining the
stockholders entitled to vote at the meeting. You are not entitled to notice of,
or to vote at, the meeting if you were not a stockholder of record at the close
of business on that date.
You are cordially invited to attend the meeting. Whether or not you expect to
attend the meeting in person, please sign, date and promptly return the enclosed
proxy to ensure that your shares will be represented at the meeting. The
enclosed envelope requires no postage if mailed within the United States. Most
of our stockholders hold their shares in "street name" through brokers, banks
and other nominees and may choose to vote their shares over the internet or by
telephone instead of using the enclosed proxy card. If you wish to vote over the
internet or by telephone, please follow the instructions on your proxy card. If
you attend the meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors,
/s/ Stanton Remer
-----------------------------------
Stanton Remer
Secretary
Pennsauken, New Jersey
April 21, 2006
RCM TECHNOLOGIES, INC.
2500 MCCLELLAN AVENUE
SUITE 350
PENNSAUKEN, NEW JERSEY 08109
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PROXY STATEMENT
--------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 2006
ABOUT THIS PROXY STATEMENT
Our Board of Directors is soliciting proxies to be used at our 2006 Annual
Meeting of Stockholders. The meeting will be held at the law offices of Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103 on
Thursday, June 15, 2006, at 6:00 p.m. local time. This proxy statement, the
notice of annual meeting and the form of proxy will be mailed to stockholders
beginning on or about April 21, 2006.
VOTING PROCEDURES
WHO CAN VOTE
Only RCM common stockholders at the close of business on the record date,
April 20, 2006, may vote at the annual meeting. You are entitled to cast one
vote for each share of RCM common stock that you owned as of the close of
business on the record date. At the close of business on the record date, there
were 11,762,994 shares of RCM common stock outstanding.
HOW YOU CAN VOTE
You can vote by:
o marking your proxy card, dating and signing it, and returning
it in the postage-paid envelope we have provided, or
o attending the meeting and voting in person.
HOW YOU CAN REVOKE YOUR PROXY OR CHANGE YOUR VOTE
You can revoke your proxy at any time before it is voted at the meeting by:
o sending a written notice that you have revoked your proxy to
our Secretary, Stanton Remer, at 2500 McClellan Avenue, Suite
350, Pennsauken, New Jersey 08109-4613,
o submitting a later-dated proxy card, or
o attending the meeting, giving our Secretary written notice of
your revocation and voting your shares.
If a bank, broker or other holder of record holds your shares in its name,
you must obtain a proxy card executed in your favor from the holder of record to
be able to vote your shares at the meeting.
GENERAL INFORMATION ON VOTING
A quorum must exist for voting to take place at the meeting. A quorum exists
if holders of a majority of the outstanding shares of our common stock are
present at the meeting in person or are represented by proxy at the meeting.
Shares represented by a proxy marked "abstain" or "withheld" on any matter will
be considered present at the meeting for purposes of determining whether there
is a quorum, but will not be considered as votes FOR or AGAINST that matter.
Shares represented by a proxy as to which there is a "broker non-vote" (that is,
where a broker holding your shares in "street" or "nominee" name indicates to us
on a proxy that you have given the broker the discretionary authority to vote
your shares on some but not all matters), will be
considered present at the meeting for purposes of determining a quorum but
will not be voted on matters as to which there is a "broker non-vote."
Abstentions and "broker non-votes" will therefore have no effect on the
outcome of any vote taken at the meeting.
The director nominees will be elected by a plurality of the votes cast for
the election of directors at the meeting. Thus, the nominee who receives the
most votes will be elected as a director. All other matters to be voted upon at
the meeting must be approved by a majority of the votes cast on those matters.
Shares that have been properly voted and not revoked will be voted at the
meeting in accordance with the instructions on your proxy card. If you sign your
proxy card but do not mark your choices, Leon Kopyt or Stanton Remer, the
persons named on the enclosed proxy card, will vote the shares represented by
your proxy card:
o FOR the person we nominated for election as director;
o FOR the adoption of the Company's 2006 Omnibus Equity
Compensation Plan; and
o FOR the ratification of our Audit Committee's appointment of
Grant Thornton LLP as our independent accountants for our
fiscal year ending December 30, 2006.
If any other matters are properly presented at the meeting for consideration,
Mr. Kopyt and Mr. Remer will have the discretion to vote on those matters for
you. Currently, we are not aware of any such matters.
COSTS OF SOLICITATION
We will pay for preparing, assembling and mailing this proxy statement. Our
directors, officers and employees may solicit proxies through the mails, direct
communication or otherwise. None of our directors, officers or employees will
receive additional compensation for soliciting proxies. We may reimburse
brokerage firms and other custodians, nominees or fiduciaries for their
reasonable expenses for forwarding proxy and solicitation materials to
stockholders.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists the persons we know to be beneficial owners of at
least five percent of our common stock as of March 9, 2006.
APPROXIMATE
PERCENTAGE
OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES COMMON STOCK
------------------------------------ ---------------- --------------
Columbia Wanger Asset Management, L.P. .... 2,276,000(1) 19.7%
227 West Monroe Street
Suite 3000
Chicago, IL 60606
Heartland Advisors, Inc. .................. 1,539,800(2) 13.3%
789 North Water Street
Milwaukee, WI 53202
FMR Corp. ................................. 1,140,063(3) 9.9%
82 Devonshire Street
Boston, MA 02109
Dimensional Fund Advisors Inc. ............ 811,177(4) 7.0%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
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(1) Based on a Schedule 13G, dated February 13, 2006, filed with the
Securities and Exchange Commission (the "Commission") by Columbia Wanger
Asset Management, L.P., ("CWAM"), a registered investment advisor and WAM
Acquisition GP, Inc. for itself and as general partner of CWAM, joined by
Columbia Acorn Investment Trust and Wanger Advisors Trust. The Schedule
13G states that CWAM has sole voting and dispositive power to all of
these shares and that WAM Acquisition GP, Inc. shares voting and
dispositive power as to all of these shares. The Schedule 13G also states
that Columbia Acorn Trust holds 6.8% of RCM's outstanding common stock
and that Wanger Advisors Trust holds 6.5% of RCM's outstanding common
stock.
(2) Based on a Schedule 13G, dated February 3, 2006, filed with the
Commission. The Schedule 13G states that Heartland Advisors, Inc., a
registered investment advisor, and William J. Nasgoritz have shared
voting power as to 1,421,000 of these shares and shared dispositive power
as to all of these shares. The Heartland Value Fund, an account managed
by Heartland Advisors, Inc. owns 780,000 shares, or 6.7% of RCM's
outstanding common stock. Heartland Advisors, Inc. and William J.
Nasgovitz each disclaim beneficial ownership of any of these shares.
(3) Based on a Schedule 13G, dated February 14, 2006, filed with the
Commission by FMR Corp., a parent holding corporation, on behalf of
itself, Edward C. Johnson III, Fidelity Management, Research Company and
Fidelity Low Priced Stock Fund. The Schedule 13G states that Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp. and
a registered investment advisor, is the beneficial owner of all of these
shares as a result of acting as investment adviser to various registered
investment companies, including Fidelity Low Priced Stock Fund which owns
all of these shares. Edward C. Johnson, III and FMR Corp., through its
control of Fidelity Management & Research Company and Fidelity Low Priced
Stock Fund, each have sole dispositive power as to all of these shares.
The Schedule 13G also states that Fidelity Low Priced Stock Fund's Board
of Trustees has sole voting power as to all of these shares.
(4) Based on a Schedule 13G, dated February 1, 2006, filed with the
Commission. The Schedule 13G states that Dimensional Fund Advisors, Inc.
has sole voting and investment power as to all of these shares.
Dimensional Fund Advisors, Inc. disclaims beneficial ownership of these
shares.
3
SECURITY OWNERSHIP OF MANAGEMENT
The following table lists the number of shares of our common stock
beneficially owned, as of April 7, 2006, by each director and director nominee,
each of our executive officers, certain members of our senior management, and by
our directors, nominees and executive officers as a group. In general,
beneficial ownership includes those shares a person has the power to vote or
transfer, as well as shares owned by immediate family members who live with that
person.
APPROXIMATE
PERCENTAGE
OF OUTSTANDING
NAME NUMBER OF SHARES COMMON STOCK
---- ---------------- --------------
Leon Kopyt (1).......................... 541,906 4.6%
Stanton Remer (2)....................... 156,974 1.3%
Norman S. Berson (3).................... 66,471 *
Robert B. Kerr (3)...................... 68,471 *
David Gilfor (4)........................ 15,000 *
Dennis Berkey (5)....................... 83,333 *
Dennis Busel (6)........................ 15,000 *
Rocco Campanelli (7).................... 88,760 *
Kevin D. Miller (2)..................... 150,913 1.3%
James Schappert......................... 0 *
John Pringle (8)........................ 13,000 *
Christopher Giunta (8).................. 18,000 *
Frank Bocassi (8)....................... 13,000 *
All directors and executive officers as
a group (13 persons) (9) .............. 1,230,828 10.0%
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* Represents less than one percent of our outstanding common stock.
(1) Includes 150,000 shares issuable upon the exercise of options under our
stock option plans and 28,312 shares as to which Mr. Kopyt has sole
voting power in the election of directors. Mr. Kopyt disclaims beneficial
ownership of these 28,312 shares.
(2) Consists of 100,000 shares issuable upon the exercise of options under
our stock option plans.
(3) Consists of 40,000 shares issuable upon the exercise of options under our
stock option plans.
(4) Includes 15,000 shares issuable upon the exercise of options under our
stock option plans.
(5) Includes 83,333 shares, issuable upon the exercise of options under our
stock option plans.
(6) Includes 15,000 shares issuable upon the exercise of options under our
stock option plans.
(7) Includes 62,000 shares issuable upon the exercise of options under our
stock option plans.
(8) Includes 13,000 shares, issuable upon the exercise of options under our
stock option plans, none of which were exercisable within 60 days after
the record date.
(9) Includes 644,333 shares issuable upon the exercise of options under our
stock option plans.
VOTING ARRANGEMENTS
On February 5, 1996, we issued and sold 276,625 shares of our common stock to
Limeport Investments, LLC in a private placement transaction. In conjunction
with this transaction, Limeport granted Mr. Kopyt an irrevocable proxy entitling
him to vote those shares solely in connection with the election of our
directors. We believe that, as of March 9, 2006, Limeport beneficially owned
28,312 shares of our common stock.
If Mr. Kopyt ceases to serve as our Chairman, Chief Executive Officer and
President, the Limeport voting arrangement and the proxy granted will terminate
immediately.
4
PROPOSAL 1
-------------------------
ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes. Each of the classes B
and C has two directors and class A has one director. Directors are elected to
staggered three-year terms and will serve until their successors have been
elected and qualified.
The term of our Class A director, Norman S. Berson, expires at this year's
annual meeting. The Class B directors, Robert B. Kerr and David Gilfor, will
serve until the annual meeting in 2007. The Class C directors, Leon Kopyt and
Stanton Remer, will serve until the annual meeting in 2008.
BOARD INDEPENDENCE
The Board of Directors has determined that Robert B. Kerr, David Gilfor, and
Norman S. Berson are "independent directors" as defined in Marketplace Rule
4200(a) (15) of the National Association of Securities Dealers. In this Proxy,
these three directors are referred to individually as an "Independent Director"
and collectively as the "Independent Directors."
One Class A director will be elected at this year's annual meeting to serve
for a three-year term expiring at our annual meeting in 2009. All of the
Independent Directors have nominated Norman S. Berson to serve as a Class A
director. Mr. Berson has consented to serve a term on our Board of Directors.
The persons named as proxy holders on the enclosed proxy card, Mr. Kopyt and Mr.
Remer, intend to vote FOR the election of Mr. Berson unless you mark a contrary
instruction on your proxy card. Unless you indicate otherwise on your proxy
card, if Mr. Berson is unable to serve as a director at the time of this year's
annual meeting, Mr. Kopyt or Mr. Remer will vote FOR the election of another
person that the Board may nominate in his place.
NOMINEES FOR ELECTION AS DIRECTOR
CLASS A DIRECTOR NOMINEE
NORMAN S. BERSON, Director since 1987, age 79
Mr. Berson is Of Counsel to the law firm of Fineman Krekstein & Harris, P.C.
of Philadelphia, Pennsylvania. Previously, Mr. Berson was a member of the House
of Representatives of the Commonwealth of Pennsylvania for 17 years.
CURRENT BOARD MEMBERS
CLASS B DIRECTORS
ROBERT B. KERR, Director since 1994, age 63
Mr. Kerr is a founding partner of Everingham & Kerr, Inc., a merger &
acquisition consulting firm located in Haddon Heights, New Jersey, which has
served small and medium-sized manufacturing, distribution and service businesses
since 1987.
DAVID GILFOR, Director since 2001, age 58
Mr. Gilfor is a member of the information technology department of Goldenberg
Rosenthal, LLP, a regional accounting and consulting firm located in Jenkintown,
Pennsylvania. Previously, Mr. Gilfor was the owner of a computer networking and
distributing firm located in Philadelphia, Pennsylvania.
CLASS C DIRECTORS
LEON KOPYT, Director since 1991, age 61
Mr. Kopyt has been our President, Chief Executive Officer and Chairman of the
Board since 1992. Previously, Mr. Kopyt served as our Chief Financial Officer
and Treasurer from 1992 to 1994, and as our Chief Operating Officer from May
1990 to January 1992.
5
STANTON REMER, Director since 1992, age 56
Mr. Remer has been our Chief Financial Officer, Secretary and Treasurer since
1994. Effective January 1, 2005, Mr. Remer was promoted to Executive Vice
President. Previously, Mr. Remer held positions as a Managing Partner of a
northeast regional accounting firm and Chief Financial Officer of Sterling
Supply Corporation. Mr. Remer is a Certified Public Accountant.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF NORMAN S. BERSON
AS A CLASS A DIRECTOR.
OUR EXECUTIVE OFFICERS
The following table lists our executive officers as of December 31, 2005 and
certain members of our senior management. Our Board elects our executive
officers annually for terms of one year and may remove any of our executive
officers with or without cause.
NAME AGE POSITION
---- --- --------
Executive Officers:
Leon Kopyt............................................ 61 Chairman, Chief Executive Officer, President
and Director
Stanton Remer......................................... 56 Executive Vice President, Chief Financial
Officer, Treasurer, Secretary and Director
Senior Management:
Rocco Campanelli...................................... 55 Executive Vice President
Dennis Berkey......................................... 57 Senior Vice President
Frank Bocassi......................................... 44 Senior Vice President
Dennis Busel.......................................... 41 Senior Vice President
Christopher Giunta.................................... 45 Senior Vice President & General Manager
Kevin D. Miller....................................... 39 Senior Vice President
John Pringle.......................................... 53 Senior Vice President
James Schappert....................................... 47 Senior Vice President
The business experience of Messrs. Kopyt and Remer is summarized in "Proposal
1 - Election of Directors."
ROCCO CAMPANELLI has served as an Executive Vice President of RCM since June
1999. From September 1995 until June 1999, Mr. Campanelli served as a Senior
Vice President of RCM and our General Manager of Professional Engineering.
Previously, Mr. Campanelli was a Senior Vice President of Operations and
Marketing for Cataract, Inc., a business we acquired in August 1995. From the
time he joined Cataract in 1988 until August 1995, Mr. Campanelli held the
position of Northeast Regional Manager and Vice President of Operations.
DENNIS BERKEY has served as a Senior Vice President of RCM since May 1999.
Previously, Mr. Berkey was a founder of Business Support Group of Michigan,
Inc., a business we acquired in 1999. Mr. Berkey has in excess of 19 years of
experience in software development, information systems management, ERP
consulting and related project management.
FRANK BOCASSI has served as Vice President of Technical Solutions for RCM's
Long Island ("LI") Solutions Practice since March 2004. Effective January 1,
2006, Mr. Bocassi was promoted to Senior Vice President. From August 1999 until
March 2004, Mr. Bocassi served as Senior Account Manager for the LI Practice.
Previously, Mr. Bocassi was a partner at Seaview Consulting, Inc., which was
acquired by RCM in 1999. Mr. Bocassi has 21 plus years of experience in
technical solutions and account management.
DENNIS BUSEL has served as Senior Vice President of RCM's North East region
since July 2003. Mr. Busel, who joined RCM in February 2000, has over 20 years
experience in the IT services industry including a senior management role at
Robert Half, International where he led the launch of the IT Consulting
Division. He has provided leadership for teams in size ranging from 6 to 400
people on a local and national level. Mr.
6
Busel has been instrumental in establishing service offerings, promoting
sales, and directing the operations and delivery for both resource management
and project organizations.
CHRISTOPHER GIUNTA has served as Vice President and General Manager for the
Long Island Solutions Practice of RCM since March 2004. Effective January 1,
2006, Mr. Giunta was promoted to Senior Vice President. From August 1999 until
March 2004, Mr. Giunta served as Senior Account Manager for the Long Island
Practice. Prior to joining RCM, Mr. Giunta was a partner at Seaview Consulting,
Inc., which was acquired by RCM in 1999. Mr. Giunta has in 21 years experience
in software development, information systems management, and related project
management.
KEVIN D. MILLER has served as a Senior Vice President of RCM since January
1998. Previously, Mr. Miller was a consultant to RCM from July 1997 through
December 1997. From 1996 until July 1997, Mr. Miller served as an Associate in
the corporate finance department of Legg Mason Wood Walker, Incorporated. From
1995 to 1996, Mr. Miller was a business consultant for the Wharton Small
Business Development Center. Mr. Miller previously served as a member of both
the audit and corporate finance groups at Ernst & Young, LLP. Mr. Miller is a
Certified Public Accountant.
JOHN PRINGLE has served as Western Region Senior Vice President of RCM since
November 2001. Mr. Pringle's primary responsibilities are in the IT services
sector in the Western Region. Mr. Pringle has over 24 years experience in the IT
services industry. Mr. Pringle's experience includes leadership skills relating
to the implementation and establishment of a Solutions Practice focused on
Oracle, e-Solutions and system integration.
JAMES SCHAPPERT has served as Senior Vice President of RCM's IT Consulting
Division since May 2005. Mr. Schappert's responsibilities are National in nature
and encompass all of RCM's Information Technology Consulting operations. Prior
to joining RCM, Mr. Schappert gained over 25 years of experience in the IT
professional services and software field with senior management positions in IT
Consulting firms as well as the applications and systems software market
including CIBER, International Business Systems and Software Design
Incorporated.
7
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table lists cash and other compensation paid to, or accrued by
us for, our chief executive officer and each of the persons who, based upon
total annual salary and bonus, was one of our other four most highly compensated
executives for our fiscal year ended December 31, 2005. The information is
presented for each individual for our last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- ----------------------------
AWARDS
SECURITIES
UNDERLYING
FISCAL OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1,2) SARS COMPENSATION(3)
--------------------------- ------ -------- -------- ----------------- ---------- ---------------
Leon Kopyt ................................... 2005 $475,000 $ 75,000 $ 0 $100,000 $18,757
President and CEO 2004 $475,000 $ 35,000 $ 0 0 $16,921
2003 $475,000 $100,000 $3,698,068 50,000 $11,119
Stanton Remer ................................ 2005 $200,000 $ 30,000 $ 0 50,000 $ 6,575
EVP, CFO, Treasurer and 2004 $200,000 $ 25,000 $ 0 0 $ 6,575
Secretary 2003 $200,000 $ 50,000 $ 410,045 25,000 $ 815
Rocco Campanelli ............................. 2005 $175,000 $ 75,000 $ 0 50,000 $ 9,779
Executive Vice President 2004 $175,000 $123,776 $ 0 0 $ 9,664
2003 $150,000 $151,869 $ 218,416 25,000 $ 5,633
James Schappert (4) .......................... 2005 $114,423 $ 15,000 $ 0 60,000 $ 4,405
Senior Vice President
Kevin D. Miller .............................. 2005 $200,000 $ 25,000 $ 0 50,000 $14,058
Senior Vice President 2004 $200,000 $ 25,000 $ 0 0 $12,926
2003 $200,000 $ 45,000 $ 325,236 25,000 $ 7,813
---------------
(1) During fiscal 2003, 2004 and 2005, certain of the officers named in this
table received personal benefits not reflected in the amounts of their
respective annual salaries or bonuses. The dollar amount of these
benefits did not, for any individual in any fiscal year, exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported
for that individual in any year.
(2) In order to enhance long-term value for the shareholders of the Company,
reduce the number of options outstanding and improve the Company's
ability to retain and provide incentives to employees and directors, on
September 30, 2003, the Company made a tender offer to exchange stock
options with a strike price of $7.00 or greater for shares of restricted
stock and cash. Upon expiration of the tender offer on November 14, 2003,
option holders who were executive officers named above and participated
in the tender offer received 469,675 shares of restricted stock having an
aggregate value of $3.0 million ($6.30 per share) as well as cash
consideration of $2.0 million, which was equal to 67% of the value of the
restricted common stock.
(3) This amount represents (i) premiums we paid in 2005, 2004 and 2003,
respectively, for life and disability insurance on certain of the
officers named in this table as follows: Leon Kopyt: $372, $372 and $226;
Stanton Remer: $190, $190 and $182; Rocco Campanelli: $190, $184 and
$184; James Schappert $63 (2005); and Kevin Miller: $190, $190, and $190;
(ii) premiums we paid in 2005, 2004 and 2003, respectively, for medical
insurance on certain of the officers named in this table as follows: Leon
Kopyt: $17,760, $15,924 and $10,268; Stanton Remer: $5,760, $5,760 and
$0; Rocco Campanelli: $8,964, $8,856 and $4,824; James Schappert $4,342
(2005); and Kevin Miller $13,243, $12,110 and
8
$6,998; and (iii) matching contributions each of $625, $625, and $625,
respectively, that we made during our fiscal years ended December 31, 2005,
January 1, 2005 and December 27, 2003 for each of the officers named in
this table except for James Schappert, who commenced employment on May 9,
2005, in accordance with RCM's retirement savings plan adopted pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended.
(4) Mr. Schappert commenced his employment with RCM effective May 9, 2005 as
Senior Vice President in charge of national sales. His salary is $175,000
per annum.
OPTIONS GRANTED TO OUR EXECUTIVES IN FISCAL 2005
The following table lists information regarding the options to purchase our
common stock we granted to our executive officers and certain members of our
senior management during our fiscal year ended December 31, 2005. We have never
granted any stock appreciation rights.
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- -------------------
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------ ------------ ----------- ---------- -------- --------
Leon Kopyt ...................................... 100,000 10.0% $4.40 6/27/2015 $276,714 $701,247
Stanton Remer ................................... 50,000 5.0% 4.40 6/27/2015 138,357 350,623
Rocco Campanelli ................................ 50,000 5.0% 4.40 6/27/2015 138,357 350,623
James Schappert ................................. 50,000 5.0% 4.40 6/27/2015 138,357 350,623
James Schappert ................................. 10,000 1.0% 4.91 12/27/2015 30,879 78,253
Kevin D. Miller ................................. 50,000 5.0% 4.40 6/27/2015 138,357 350,623
---------------
(1) Potential realizable value is reported net of option exercise price but
before taxes associated with exercise. These amounts represent assumed
rates of appreciation only. Actual gains, if any, on the options are
dependent upon the future performance of our common stock, and the
amounts reflected in the table will not necessarily be achieve
OPTION EXERCISES IN FISCAL 2005 AND FISCAL YEAR-END OPTION VALUES
The following table lists the number and value of options held by our
executive officers and certain members of our senior management at the end of
our fiscal year ended December 31, 2005. No options were exercised during our
fiscal year ended December 31, 2005 by any of our executive officers or
members of our senior management listed in the summary compensation table of
this proxy statement. RCM does not have any outstanding stock appreciation
rights. The values listed relate solely to outstanding stock options.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Leon Kopyt ................................ -- -- 150,000 100,000 $267,500 $70,000
Stanton Remer ............................. -- -- 100,000 50,000 55,000 35,000
Rocco Campanelli .......................... -- -- 62,000 75,000 80,730 63,750
James Schappert ........................... -- -- 0 60,000 0 36,900
Kevin D. Miller ........................... -- -- 100,000 50,000 55,000 35,000
---------------
(1) These values represent the difference between the closing price of our
common stock on The Nasdaq National Market on December 31, 2005 and the
exercise price of each option, multiplied by the number of shares
issuable upon the exercise of each option.
9
COMPENSATION OF DIRECTORS
Our employee directors do not receive any compensation for serving on our
Board or its committees, other than the compensation they receive for serving as
employees of RCM.
The Board of Directors has approved a compensation package for non-employee
directors, which became effective in May 2000. Under the arrangement, each
non-employee director receives a retainer fee of $24,000 per year as
compensation for service on the Board. In addition to the retainer fee, each
eligible non-employee director is paid meeting attendance fees of $750 for each
Board Meeting and $300 for each Committee Meeting in excess of four that is held
on a date other than the date of a Board Meeting.
All employee and non-employee directors also are eligible to receive options
to purchase our common stock and stock appreciation rights under our stock
option plans.
EMPLOYMENT AGREEMENTS
Mr. Kopyt's employment agreement provides for an annual base salary of
$475,000, vacation time and other customary benefits. In addition, the agreement
provides that Mr. Kopyt's annual bonus will be based on our EBITDA, defined as
earnings before interest, taxes, depreciation and amortization.
Mr. Kopyt's employment agreement is for a term of three years and
automatically extends each year for an additional one-year period. This
employment agreement is terminable upon Mr. Kopyt's death or disability, or for
cause, as defined in the agreement.
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT ARRANGEMENTS FOR MR. KOPYT
Mr. Kopyt has an agreement with us that provides him with benefits upon a
change in control of RCM. Under this agreement, the remaining term of Mr.
Kopyt's employment is extended for five years upon a change in control. If,
during the term of Mr. Kopyt's employment following a change in control, RCM
terminates Mr. Kopyt's employment other than for cause, as defined in the
agreement, or Mr. Kopyt terminates his own employment for good reason, also as
defined in the agreement, the provisions below will apply. The agreement defines
"good reason" as, among other things, a material change in Mr. Kopyt's salary,
title or reporting responsibilities, or a change in RCM's office location that
requires Mr. Kopyt to relocate. This agreement includes the following
provisions, each of which is effective upon Mr. Kopyt's termination other than
for cause or for good reason, in either case following a change in control:
o RCM must pay to Mr. Kopyt a lump sum equal to the total amount
of his salary and bonus for the remainder of the five-year
term.
o RCM must pay to Mr. Kopyt an amount equal to the sum of all
penalties he is assessed (including excise taxes imposed on
certain parachute payments) and taxes he incurs as a result of
the benefits he will receive under the agreement.
SEVERANCE AGREEMENT FOR MR. KOPYT
On June 10, 2002, the Company entered into a Severance Agreement (the
"Severance Agreement") with Mr. Kopyt. The agreement provides for certain
payments to be made to Mr. Kopyt and for the continuation of Mr. Kopyt's
employee benefits for a specified time after his service with the Company is
terminated other than for cause, as defined in the Severance Agreement. Amounts
payable to Mr. Kopyt under the Severance Agreement would be offset and reduced
by any amounts received by Mr. Kopyt after his termination of employment under
his current employment and termination benefits agreements, which are
supplemented and not superseded by the Severance Agreement.
10
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The graph below is presented in accordance with SEC requirements. You should
not draw any conclusions from the data in the graph, because past results do
not necessarily predict future stock price performance. The graph does not
represent our forecast of future stock price performance.
The graph below compares our total stockholder return over the five-year
period ended December 31, 2005 to the cumulative total return of two indices
over the same period: Total Return Index for the Nasdaq Stock Market, and a
peer group of staffing companies that we selected in good faith. In developing
the index, each selected company is weighted based on its market
capitalization measured on December 31, 2005.
Our self-determined peer group consists of the following corporations:
Butler International, Inc. MPS Group, Inc.
Kelly Services, Inc. Spherion Corporation
The graph assumes that $100 was invested on December 31, 2000 in each of our
common stock, the Nasdaq Stock Market (U.S.) Index and the peer group, and
that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG RCM TCHNOLOGIES, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
[GRAPHIC OMITTED]
TOTAL RETURN ANALYSIS 2000 2001 2002 2003 2004 2005
--------------------- ------ ------ ------ ------ ------ ------
RCM Technologies, Inc .................................................... $100.0 $129.7 $107.9 $203.3 $138.8 $140.7
Nasdaq Stock Market (U.S.) ............................................... $100.0 $ 79.1 $ 56.0 $ 83.4 $ 90.6 $ 92.7
Peer Group ............................................................... $100.0 $107.7 $ 94.0 $132.7 $150.3 $156.2
11
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
We believe that, during our fiscal year ended December 31, 2005, our
executive officers and directors made all required filings under Section 16(a)
of the Securities Exchange Act on a timely basis. Our belief is based solely on:
o our review of copies of forms filed pursuant to Section 16(a)
and submitted to us during and with respect to our fiscal year
ended December 31, 2005 and
o representations from the Company's directors, executive
officers and beneficial owners of more than 10% of RCM Stock
that they have complied with all Section 16(a) filing
requirements with respect to 2005.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors has an executive committee, an audit committee and a
compensation committee. The committees report their actions to the full Board at
the Board's next regular meeting. The following table shows on which of our
Board's committees each of our directors served.
Our Board of Directors held five meetings in the fiscal year ended December
31, 2005. The Company does not have a specific written policy with regard to
attendance of directors at our annual meetings of stockholders, although board
member attendance is strongly encouraged. Each of our five directors attended
all Board meetings, including the 2005 Annual Meeting, and all meetings of the
committees on which each director served. At each meeting of the Board of
Directors, there was an executive session attended only by the Independent
Directors.
COMMITTEE
---------------------------------
BOARD MEMBER EXECUTIVE AUDIT COMPENSATION
------------ --------- ----- ------------
Leon Kopyt................................... X
Stanton Remer................................ X
Norman S. Berson............................. X
David Gilfor................................. X X
Robert B. Kerr............................... X X
GENERAL DUTIES OF EACH COMMITTEE
The general duties of each committee are as follows:
EXECUTIVE COMMITTEE
o Acts on behalf of our Board between meetings of the Board.
o Met five times during our fiscal year ended December 31, 2005.
AUDIT COMMITTEE
o Reviews our financial and accounting practices, controls and
results, reviews the scope and services of our auditors and
appoints our independent auditors.
o Met six times during our fiscal year ended December 31, 2005.
o See "Report of the Audit Committee" below.
The Board of Directors has adopted a written Audit Committee Charter, which
was disclosed in our proxy notice dated April 25, 2003. A copy of the Audit
Committee Charter is attached herewith as Appendix Number 1.
12
COMPENSATION COMMITTEE
o Determines the compensation of our officers and employees.
o Administers our stock option plans.
o Met two times during our fiscal year ended December 31, 2005.
o See "Report of the Compensation Committee" below.
INDEPENDENCE OF COMMITTEES
The Board of Directors has determined each member of the Audit Committee and
the Compensation Committee of the Board meets the independence requirements
applicable to members of those committees as prescribed by the National
Association of Securities Dealers, the Commission and the Internal Revenue
Service. The Board of Directors has further determined that Robert B. Kerr,
Chair of the Audit Committee, is an "audit committee financial expert" as such
term is defined in Item 401(h) of Regulation S-K promulgated by the Commission.
DIRECTOR NOMINATIONS
Due to its relatively small size, the Board of Directors does not have a
separate nominating committee. Nominees for election to the Board of Directors
are selected by a majority of our Independent Directors. The Independent
Directors do not have a charter relating to the nominating process. They seek
nominees with the highest personal and professional character and integrity, who
possess appropriate characteristics, skills, experience and time to make a
significant contribution to the Board of Directors, the Company and its
stockholders.
The Independent Directors consider recommendations for nominations from a
variety of sources, including directors, business contacts, legal counsel,
community leaders and members of management. In addition, the Independent
Directors consider stockholder recommendations for director nominees that are
received in a timely manner. Nominees proposed by shareholders will be
considered using the same criteria and in the same manner as all other nominees.
All such stockholder recommendations should be submitted in writing in care of
Stanton Remer, Secretary, RCM Technologies, Inc., 2500 McClellan Avenue, Suite
350, Pennsauken, New Jersey 08109 no later than December 30, 2006.
COMMUNICATIONS WITH THE BOARD
Stockholders may send communications to the Board of Directors in writing,
addressed to the full Board of Directors, individual directors or a specific
committee of the Board of Directors, in care of Stanton Remer, Secretary, RCM
Technologies, Inc., 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey
08109. In general, all stockholder communications sent to our Secretary for
forwarding to the Board of Directors or to specified Board members will be
forwarded in accordance with the sender's instructions. However, our Secretary
reserves the right not to forward any personally abusive or otherwise
inappropriate materials.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The following Report of the Compensation Committee and the performance graph
included elsewhere in this proxy statement do not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates this Report
or the performance graph by reference therein.
This report summarizes the functions and philosophical principles of the
compensation committee, the components of the compensation paid to RCM's
executives and other factors that the compensation committee considers in
determining the compensation of RCM's executives.
13
FUNCTIONS OF THE COMMITTEE
The compensation committee's primary functions include:
o reviewing, approving and determining the salaries, bonuses and
other benefits of RCM's directors, executive officers and
senior management,
o recommending to RCM's Board amendments to existing stock option
plans and the adoption of new stock option plans,
o negotiating, reviewing, approving and determining the adoption
of, or amendments to, any compensatory plans, arrangements or
agreements between RCM and its executives, and
o establishing and reviewing management perquisites.
COMPENSATION PHILOSOPHY
The Company's compensation program for executives consists of three key
elements:
o a base salary,
o a performance-based annual cash bonus, and
o periodic grants of stock options.
Under this approach, executive compensation involves a high proportion of pay
that is "at risk" namely, the annual bonus and stock options. The variable
annual bonus also is based, in significant part, on Company performance. Stock
options relate a significant portion of long-term remuneration directly to stock
price appreciation realized by all of the Company's stockholders. We believe
that this three-part approach best serves the interests of the Company and its
stockholders. It enables the Company to meet the requirements of the highly
competitive environment in which we operate while ensuring that executive
officers are compensated in a way that advances both the short-term and
long-term interests of stockholders.
COMPONENTS OF COMPENSATION
The compensation committee generally structures RCM executives' compensation
through a combination of the following:
o Base Salary: As a general rule, the compensation committee
establishes base salaries for RCM's executives based upon the
individual's performance and contribution to RCM. The Committee
takes into account base salaries of executives in comparable
positions in companies similar to RCM. Some of RCM's executives
are parties to employment agreements. The salaries of those
executives are based on their agreements.
o Annual Incentive Compensation: The compensation committee
provides annual incentive awards to RCM's executives to reward
their contributions to RCM. Mr. Kopyt's bonus is based solely
on RCM's EBITDA. Mr. Remer's bonus is determined based on a
combination of EBITDA and certain other factors at the
discretion of the chief executive officer. The bonuses of all
other executives are determined based on RCM's operating income
and certain other factors at the discretion of the chief
executive officer, based on the guidelines established by the
compensation committee.
o Long-Term Incentive Compensation: The compensation committee
periodically grants stock options and other RCM securities to
RCM executives. The compensation committee intends the grants
to be a significant portion of the total executive
compensation. The grants are designed to align the interests of
each RCM executive with those of the stockholders, and provide
each executive with a significant incentive to manage RCM from
the perspective of an owner with an equity stake in the
business. Grants typically permit executives to acquire RCM's
common stock at a fixed price per share (generally, the market
price on the grant date) over a specified period of time
(usually up to ten years). The grants provide a return to the
executive only if the market price of the shares appreciates
over the option term.
14
The compensation committee bases the size of each executive's option grant
upon the executive's:
o position with RCM,
o potential for future responsibility over the option term,
o performance in recent periods, and
o current holdings of RCM stock and options.
The compensation committee believes that RCM's financial performance is a
better indicator of executive achievement than its stock price. The compensation
committee examines a number of financial indicators in assessing RCM's
performance, including:
o net sales,
o operating income,
o net income, and
o earnings per share.
The compensation committee does not base compensation decisions upon any
precise formula or accord any one factor greater weight than the other factors.
COMPENSATION OF LEON KOPYT, RCM'S CHIEF EXECUTIVE OFFICER
Leon Kopyt, RCM's Chief Executive Officer, participates in the same programs
as RCM's other executives, and receives compensation based on: the same factors
as RCM's other executives, his employment agreement and a termination benefits
agreement. Mr. Kopyt's overall compensation reflects his degree of policy and
decision-making authority and his level of responsibility with respect to RCM's
strategic direction and financial and operational results. Mr. Kopyt's
compensation for 2005 was determined based on a study of the compensation of
chief executive officers of other companies in the information technology
industry, which have financial and corporate characteristics similar to those of
RCM. Mr. Kopyt's compensation components for RCM's fiscal year ended December
31, 2005 were as follows:
o Base Salary: Mr. Kopyt received a base salary of $475,000.
o Annual Incentive Compensation: Pursuant to Mr. Kopyt's
incentive compensation arrangement, Mr. Kopyt received a
$75,000 bonus for the fiscal year ended December 31, 2005 based
on the Company's earnings before interest, income taxes,
depreciation, and amortization ("EBITDA"). The bonus
represented 15.8% of the base salary.
o Long-Term Incentive Compensation: Mr. Kopyt received 100,000
stock option awards during the fiscal year ended December 31,
2005.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the amount of executive
compensation RCM may deduct for federal income tax purposes. In general, Section
162(m) only allows a publicly held corporation to deduct up to one million
dollars per year of compensation paid to certain executives. The executives
whose compensation is subject to limitation under Section 162(m) are those
executives who, as of the close of a corporation's taxable year, are either the
chief executive officer (or an individual acting in such capacity), or an
executive whose compensation is required to be reported to stockholders under
the Securities Exchange Act of 1934 by reason of that executive being among the
four highest compensated officers of a corporation for the taxable year (other
than the chief executive officer). Performance-based compensation is not,
however, subject to this deduction limitation if it meets certain requirements.
One of the requirements is that performance-based compensation be payable only
on the attainment of performance goals that have been approved by a
corporation's stockholders. Compensation attributable to the exercise of options
that are granted with an exercise price at or above the fair market value of the
stock subject to the option under a stockholder-approved stock option plan
meeting certain requirements is also qualified as performance-based
15
compensation. The compensation committee has generally attempted to structure
the compensation it pays to RCM's executives subject to Section 162(m) so that
compensation that would exceed the one million dollar limitation otherwise
imposed under Section 162(m) will qualify for the exemption noted above for
performance-based compensation.
Respectfully submitted by the members of the compensation committee of the
Board of Directors:
COMPENSATION COMMITTEE
David Gilfor (Chair)
Robert B. Kerr
PROPOSAL 2
------------------------
APPROVAL OF THE RCM TECHNOLOGIES, INC.
2006 OMNIBUS EQUITY COMPENSATION PLAN
On April 12, 2006, the Board of Directors adopted, subject to stockholder
approval at the 2006 Annual Meeting, the RCM Technologies, Inc. 2006 Omnibus
Equity Compensation Plan (the "Plan"). The Board of Directors has directed that
the proposal to approve the Plan be submitted to our stockholders for their
approval at the 2006 Annual Meeting. Also, stockholder approval is being sought
(i) so that the compensation attributable to grants under the Plan may qualify
for an exemption from the $1 million deduction limit under Section 162(m) of the
Internal Revenue Code (the "Code") (see discussion of Section 162(m) under the
section entitled "Federal Income Tax Consequences" beginning on page 25 of this
proxy statement), (ii) in order for incentive stock options to meet the
requirements of the Code, and (iii) in order to meet the Nasdaq corporate
governance listing standards.
The Plan is intended to replace our 1996 Executive Stock Option Plan (the
"1996 Plan"), which terminated by its terms on January 1, 2006. In addition to
the 1996 Plan, we maintain the 2000 Incentive Stock Option Plan (the "2000
Plan"), and have outstanding grants of stock options under our 1994 Non-Employee
Directors Stock Option Plan (the "1994 Plan") and our 1992 Employee Stock Option
Plan (the "1992 Plan"). As of March 31, 2006, there were outstanding options to
purchase 83,455 shares under the 1992 Plan, 70,000 shares under the 1994 Plan,
1,131,045 shares under the 1996 Plan, and 618,383 shares under the 2000 Plan. In
addition, there are 26,306 shares available for issuance under our 2000 Plan.
The Board of Directors believes that the approval of the Plan by our
stockholders will further our compensation structure and strategy by providing
us with the ability to grant different forms of equity awards, as well as
increase the pool of shares of our common stock available for grant. Our ability
to attract, retain and motivate top quality employees, non-employee directors,
and consultants is material to our success, and the Board of Directors has
concluded that this would be enhanced by our ability to make grants under the
Plan. In addition, the Board of Directors believes that our interests and the
interests of our stockholders will be advanced if we can offer our employees,
non-employee directors, and consultants the opportunity to acquire or increase
their proprietary interests in us.
The material terms of the Plan are summarized below. This summary of the Plan
is not intended to be a complete description of the Plan and is qualified in its
entirety by the actual text of the Plan to which reference is made, which is
attached to this proxy as Appendix Number 2.
MATERIAL FEATURES OF THE PLAN
General. The Plan provides that grants may be in any of the following forms:
(i) incentive stock options, (ii) nonqualified stock options (incentive stock
options and nonqualified stock options collectively are referred to as
"options"), (iii) stock appreciation rights ("SARs"), (iv) stock units, (v)
performance shares, (vi) stock awards, and (vii) other stock-based awards.
Subject to adjustment in certain circumstances as described below, the
aggregate number of shares of common stock that may be issued or transferred
under the Plan is 800,000 shares; provided however, that no more than 400,000
shares of our common stock in the aggregate may be issued pursuant to grants of
stock
16
awards, stock units, performance shares and other stock-based awards. If and
to the extent options and SARs granted under the Plan terminate, expire or are
cancelled, forfeited, exchanged, or surrendered without having been exercised
or if any stock awards, stock units, performance shares, or other stock-based
awards are forfeited or terminated, or otherwise not paid in full, the shares
subject to such grants which have not been issued will become available again
for purposes of the Plan. To the extent any grants are paid in cash, and not
in shares of common stock any shares reserved for issuance pursuant to such
grants will again be available for grant under the Plan. To the extent SARs
are exercised under the Plan, the total number of shares of common stock
subject to the exercised portion of the SAR will count against the number of
shares reserved for issuance under the Plan if shares of common stock are paid
out upon exercise of the SAR.
The Plan provides that the maximum aggregate number of shares of common stock
that may be made with respect to grants to any individual during any fiscal year
is 300,000 shares, subject to adjustment as described below.
If approved by the stockholders, the Plan will become effective on June 16,
2006.
Administration. The Plan is administered and interpreted by our Compensation
Committee; however, the Board of Directors or its delegate will make grants
under the Plan to our non-employee directors. The Compensation Committee has the
authority to (i) determine the individuals to whom grants will be made under the
Plan, (ii) determine the type, size, and terms of the grants, (iii) determine
the time when grants will be made and the duration of any applicable exercise or
restriction period, including the criteria for exercisability and the
acceleration of exercisability, (iv) amend the terms of any previously issued
grant, subject to the limitations described below, (v) adopt guidelines separate
from the Plan that set forth the specific terms and conditions for grants under
the Plan, and (vi) deal with any other matters arising under the Plan. The
determinations of the Compensation Committee are made in its sole discretion and
are final, binding, and conclusive. The Compensation Committee presently
consists of Messrs Gilfor and Kerr, each of whom is a non-employee director.
Day-to-day administrative functions of the Plan may be performed by our
employees, as approved by the Compensation Committee.
Eligibility for Participation. All of our employees (including officers and
members of the Board of Directors) and the employees of our subsidiaries are
eligible for grants under the Plan. Our non-employee directors, including
non-employee directors of our subsidiaries, are also eligible to receive grants
under the Plan. All of our consultants, including consultants of our
subsidiaries, are also eligible to receive grants under the Plan. As of March
31, 2006, approximately 2,200 employees, 3 non-employee directors, and 300
consultants will be eligible to receive grants under the Plan.
TYPES OF AWARDS.
Stock Options
The Compensation Committee may grant options intended to qualify as incentive
stock options within the meaning of Section 422 of the Code ("ISOs"), so-called
"nonqualified stock options" that are not intended to so qualify ("NQSOs"), or
any combination of ISOs and NQSOs. Anyone eligible to participate in the Plan
may receive a grant of NQSOs. Only our employees and employees of our
subsidiaries may receive a grant of ISOs.
The Compensation Committee fixes the exercise price per share for options on
the date of grant. The exercise price of any option granted under the Plan will
be equal to or greater than the fair market value of the underlying shares of
common stock on the date of grant; however, if a participant who will be granted
an ISO is a person who holds more than 10% of the total combined voting power of
all classes of our outstanding stock or any of our subsidiaries, the exercise
price per share of an ISO granted to such person must be at least 110% of the
fair market value of a share of common stock on the date of grant. To the extent
that the aggregate fair market value of shares of common stock, determined on
the date of grant, with respect to which ISOs become exercisable for the first
time by a participant during any calendar year exceeds $100,000, such ISOs will
be treated as NQSOs.
The Compensation Committee determines the term of each option, provided,
however, that the term may not exceed ten years from the date of grant and, if
the recipient of an ISO is a person who holds more than
17
10% of the combined voting power of all classes of our outstanding stock or
any of our subsidiaries, the term for such person may not exceed five years
from the date of grant. The vesting period for options commences on the date
of grant and ends on such date as is determined by the Compensation Committee,
in its sole discretion, which is specified in the grant letter. Options may be
exercised while the participant is employed by us or providing service to us
or within a specified period of time after termination of such employment or
service, as determined by the Compensation Committee. A participant may
exercise an option by delivering notice of exercise to us or our designated
agent. The participant will pay the exercise price and any withholding taxes
for the option: (i) in cash or by certified or cashier's check, (ii) with the
approval of the Compensation Committee, by delivering shares of our common
stock already owned by the participant and having a fair market value on the
date of exercise equal to the exercise price or through attestation to
ownership of such shares, (iii) in cash, on the T+3 settlement date that
occurs after the exercise date specified in the notice of exercise, or (iv) by
such other method as the Compensation Committee may approve, to the extent
permitted by applicable law.
SARs
The Compensation Committee may grant SARs to anyone eligible to participate
in the Plan. Upon exercise of an SAR, the participant will receive an amount
equal to the excess of the fair market value of the common stock on the date of
exercise over the base amount set forth in the grant letter. Such payment to the
participant will be in cash, in shares of common stock, or in a combination of
cash and shares of common stock, as determined by the Compensation Committee.
The Compensation Committee will determine the period when SARs vest and become
exercisable, the base amount for SARs, and whether SARs will be granted in
connection with, or independently of, any options. SARs may be exercised while
the participant is employed by us or providing service to us or within a
specified period of time after termination of such employment or service, as
determined by the Compensation Committee.
Stock Units
The Compensation Committee may grant stock units to anyone eligible to
participate in the Plan. Each stock unit provides the participant with the right
to receive a share of common stock or an amount based on the value of a share of
common stock at a future date. The Compensation Committee determines the number
of stock units that will be granted, whether stock units will become payable if
specified performance goals or other conditions are met, and the other terms and
conditions applicable to the stock units. Stock units may be paid at the end of
a specified period or deferred to a date authorized by the Compensation
Committee. If a stock unit becomes distributable, it will be paid to the
participant in cash, in shares of common stock, or in a combination of cash and
shares of common stock, as determined by the Compensation Committee.
Performance Shares
The Compensation Committee may grant performance shares to anyone eligible to
participate in the Plan. Each performance share provides the participant with
the right to receive a share of common stock or an amount based on the value of
a share of common stock if specified performance goals are met. The Compensation
Committee determines the number of performance shares that will be granted, the
performance goals, the target amount that will be paid, and the other terms and
conditions applicable to the performance shares. Payments with respect to
performance shares will be made in cash, in shares of common stock, or in a
combination of cash and shares of common stock, as determined by the
Compensation Committee.
Stock Awards
The Compensation Committee may grant stock awards to anyone eligible to
participate in the Plan. The Compensation Committee may require that
participants pay consideration for the stock awards and may impose restrictions
on the stock awards. If restrictions are imposed on stock awards, the
Compensation Committee will determine whether they will lapse over a period of
time or according to such other criteria as the Compensation Committee
determines appropriate. The Compensation Committee determines the number of
shares of common stock subject to the grant of stock awards and the other terms
and conditions of the grant. Unless the Compensation Committee determines
otherwise, a participant will have the right to vote
18
shares of common stock and to receive dividends or other distributions paid on
such shares during the restriction period. The Compensation Committee may
determine that a participant's entitlement to dividends or other distributions
with respect to stock awards will be subject to the achievement of performance
goals or other conditions.
Other Stock-Based Awards
The Compensation Committee may grant other types of stock-based awards that
would not otherwise constitute options, SARs, stock units, performance shares,
and stock awards. The Compensation Committee may grant other stock-based awards
to anyone eligible to participate in the Plan. These grants will be cash-based
or based on or measured by shares of our common stock and will be payable in
cash, in shares of our common stock, or in a combination of cash and shares of
our common stock. The terms and conditions for these grants will be determined
by the Compensation Committee.
Qualified Performance Compensation. The Plan permits the Compensation
Committee to impose and specify objective performance goals that must be met
with respect to grants of stock units, performance shares, stock awards, and
other stock-based awards to employees. The Compensation Committee will determine
the performance periods for the performance goals. Forfeiture of all or part of
any such grant will occur if the performance goals are not met, as determined by
the Compensation Committee. Prior to, or soon after the beginning of, the
performance period, the Compensation Committee will establish in writing the
performance goals that must be met, the applicable performance periods, the
amounts to be paid if the performance goals are met, and any other conditions.
The performance goals, to the extent designed to meet the requirements of
Section 162(m) of the Code, will be based on one or more of the following
measures: common stock price, earnings per share of common stock, net earnings,
operating earnings, return on assets, stockholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specific revenue
goals, market penetration goals, geographic business expansion goals, cost
goals, or goals relating to acquisitions or divestitures. The foregoing measures
may be based on the employee's business unit or our performance, our
subsidiaries, us and our subsidiaries as a whole, or a combination of the
foregoing.
Deferrals. The Compensation Committee may permit or require participants to
defer receipt of the payment of cash or the delivery of shares of common stock
that would otherwise be due to the participant in connection with a grant under
the Plan. The Compensation Committee will establish the rules and procedures
applicable to any such deferrals.
Adjustment Provisions. If there is any change in the number or kind of shares
of common stock by reason of a stock dividend, spinoff, recapitalization, stock
split, or combination or exchange of shares; by reason of a merger,
reorganization, or consolidation; by reason of a recapitalization or change in
par value or by reason of any other extraordinary or unusual event affecting the
outstanding shares of common stock as a class without our receipt of
consideration, or if the value of outstanding shares of common stock is
substantially reduced as a result of a spinoff or our payment of an
extraordinary dividend or distribution, the number of shares of common stock
available for grants, the limit on the number of shares of common stock for
which any individual may receive pursuant to grants in any fiscal year, the
number of shares covered by outstanding grants, the kind of shares to be issued
or transferred under the Plan, and the price per share or the applicable market
value of such grants will be appropriately adjusted by the Compensation
Committee to reflect any increase or decrease in the number or kind of issued
shares of common stock in order to preclude, to the extent practicable, the
enlargement or dilution of the rights and benefits under such grants.
Change in Control. In the event of a change in control, grants will
automatically become fully vested and exercisable, as applicable, but only with
respect to those participants who, in the good faith determination and sole
discretion of the Compensation Committee, are likely to have their relationship
with us or our successor terminated (including a constructive termination
through a significant decrease in authority, responsibility or overall total
compensation) as a result of such change in control.
19
If a change in control occurs where we are not the surviving corporation (or
we survive as a subsidiary of another corporation), unless the Compensation
Committee determines otherwise, all outstanding options and SARs that are not
exercised will be assumed by, or replaced with comparable options and rights by,
the surviving corporation (or a parent or subsidiary of the surviving
corporation), and other grants that remain outstanding will be converted to
similar grants of the surviving corporation (or a parent or subsidiary of the
surviving corporation).
Further, in the event of a change in control, the Compensation Committee may
take any of the following actions: (i) determine that outstanding options and
SARs will automatically accelerate and become fully or partially exercisable;
(ii) determine that the restrictions and conditions on outstanding stock awards
will fully or partially lapse; (iii) provide that participants holding
outstanding performance shares will receive payment in settlement of all or a
portion of such performance shares, in an amount determined by the Compensation
Committee, based on the participant's target payment for the performance period
and the portion of the performance period that precedes the change in control;
(iv) determine that outstanding stock units will become payable in cash or
common stock in an amount not less than their target amount, as determined by
the Compensation Committee; (v) provide that other stock-based awards will
become payable, in full or in part, in cash or common stock, in amounts
determined by the Compensation Committee; (vi) require the surrender of
outstanding options and SARs for payment in cash, common stock or other
property, equal to the difference between the exercise price or base amount and
the fair market value of the common stock; (vii) after providing participants
with the ability to exercise their outstanding options and SARs, terminate such
options and SARs; and/or (viii) with respect to outstanding stock units,
performance shares or other stock-based awards, provide for a payment in
settlement of such grants in an amount and form determined by the Compensation
Committee.
Foreign Participants. If any individual who receives a grant under the Plan
is subject to taxation in countries other than the United States, the Plan
provides that the Compensation Committee may make grants to such individuals on
such terms and conditions as the Compensation Committee determines appropriate
to comply with the laws of the applicable countries.
Repricing of Options. The Plan includes a restriction providing that, without
stockholder approval, neither the Compensation Committee nor the Board of
Directors can amend or replace options previously granted under the Plan in a
transaction that constitutes a "repricing," as that term is defined under the
Nasdaq corporate governance listing standards. Adjustments to the exercise price
or number of shares of common stock subject to an option to reflect the effects
of a stock split or other extraordinary corporate transaction will not
constitute a "repricing."
Amendment and Termination of the Plan. The Board of Directors may amend or
terminate the Plan at any time, subject to stockholder approval if such approval
is required under any applicable laws or stock exchange requirements. No grants
may be issued under the Plan after June 15, 2016.
Grants Under the Plan. No grants have been awarded under the Plan. It is
currently not possible to predict the number of shares of common stock that will
be granted or who will receive any grants under the Plan after stockholder
approval at the meeting.
The last sales price of our common stock on April 10, 2006 was $6.39 per
share.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences arising with respect to grants awarded
under the Plan will depend on the type of grant. The following provides only a
general description of the application of federal income tax laws to certain
grants under the Plan. This discussion is intended for the information of
stockholders considering how to vote at the meeting and not as tax guidance to
participants in the Plan, as the consequences may vary with the types of grants
made, the identity of the recipients, and the method of payment or settlement.
The summary does not address the effects of other federal taxes (including
possible "golden parachute" excise taxes) or taxes imposed under state, local,
or foreign tax laws.
From the recipients' standpoint, as a general rule, ordinary income will be
recognized at the time of payment of cash or delivery of actual shares of common
stock. Future appreciation on shares of common
20
stock held beyond the ordinary income recognition event will be taxable at
capital gains rates when the shares of common stock are sold. We, as a general
rule, will be entitled to a tax deduction that corresponds in time and amount
to the ordinary income recognized by the recipient, and we will not be
entitled to any tax deduction in respect of capital gain income recognized by
the recipient.
Exceptions to these general rules may arise under the following
circumstances: (i) if shares of common stock, when delivered, are subject to a
substantial risk of forfeiture by reason of failure to satisfy any
employment-related, service-related, or performance-related condition, ordinary
income taxation and our tax deduction will be delayed until the risk of
forfeiture lapses (unless the recipient makes a special election to ignore the
risk of forfeiture); (ii) if an employee is granted an option that qualifies as
an "incentive stock option," no ordinary income will be recognized, and we will
not be entitled to any tax deduction, if shares of common stock acquired upon
exercise of such option are held more than the longer of one year from the date
of exercise and two years from the date of grant; (iii) we will not be entitled
to a tax deduction for compensation attributable to grants to our chief
executive officer or any of our four other most highly compensated officers, if
and to the extent such compensation does not qualify as "performance-based
compensation" under Section 162(m) of the Code, and such compensation, along
with any other non-performance-based compensation paid in the same calendar
year, exceeds $1 million; and (iv) a grant may be taxable to the recipient at 20
percentage points above ordinary income tax rates at the time it becomes vested,
plus interest, even if that is prior to the delivery of the cash or common stock
in settlement of the grant, if the grant constitutes "deferred compensation"
under Section 409A of the Code, and the requirements of Section 409A of the Code
are not satisfied.
Section 162(m) of the Code generally disallows a publicly held corporation's
tax deduction for compensation paid to its chief executive officer or any of its
four other most highly compensated officers in excess of $1,000,000 in any year.
Compensation that qualifies as performance-based compensation is excluded from
the $1,000,000 deductibility cap and therefore remains fully deductible by the
corporation that pays it. We intend that options and SARs will qualify as
performance-based compensation. Stock units, performance shares, stock awards,
and other stock-based awards granted under the Plan will only qualify as
performance-based compensation when the Compensation Committee conditions such
grants on the achievement of specific performance goals in accordance with the
requirements of Section 162(m) of the Code.
The Plan provides that we have the right to require the recipient of any
grant under the Plan to pay to us an amount necessary to satisfy our federal,
state, or local tax withholding obligations with respect to such grants. We may
withhold from other amounts payable to such individual an amount necessary to
satisfy these obligations. If the Compensation Committee permits, a participant
may satisfy our withholding obligation by having shares acquired pursuant to the
grant withheld, provided that the number of shares withheld does not exceed the
individual's minimum applicable withholding tax rate for federal, state, and
local tax liabilities. The Plan also provides that the Compensation Committee
may permit a participant to satisfy our withholding obligation that exceeds the
minimum applicable withholding tax rate by transferring to us previously
acquired shares of our common stock.
VOTES REQUIRED FOR APPROVAL OF PROPOSAL 2
The affirmative vote of a majority of the votes cast by all the stockholders
entitled to vote for this proposal will be required for approval. A properly
executed proxy marked "ABSTAIN" with respect to this proposal will be counted
for purposes of determining whether there is a quorum. However, under Nevada
law, a proxy marked "ABSTAIN" is not considered a vote cast. Accordingly, an
abstention will have no effect on the approval of this proposal.
THE BOARD HAS UNANIMOUSLY APPROVED THE 2006 OMNIBUS EQUITY COMPENSATION PLAN
AND RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL 2.
21
PROPOSAL 3
------------------------
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
Our Audit Committee has selected Grant Thornton LLP to act in the capacity of
independent accountants for the current fiscal year. Ratification and approval
by the stockholders will be sought by the Board of Directors for the selection
of Grant Thornton LLP as independent accountants to audit our accounts and
records for the fiscal year ending December 30, 2006, and to perform other
appropriate services. The affirmative vote of a majority of the outstanding
shares of our voting stock is required to ratify the selection of Grant Thornton
LLP. In the event that a majority of the shares voted at the Annual Meeting do
not vote for ratification of the selection of Grant Thornton LLP, the Audit
Committee will reconsider such selection.
Representatives of Grant Thornton LLP will be present at the Annual Meeting
and will have an opportunity to make a statement if they so desire and to
respond to questions by stockholders.
FEES BILLED BY GRANT THORNTON LLP DURING 2005 AND 2004
Audit Fees. Fees billed to the Company by Grant Thornton LLP during 2005 and
2004 for audit services rendered by Grant Thornton LLP for the audit of the
Company's annual financial statements for such years, for the review of those
financial statements included in the Company's Quarterly Reports on Form 10-Q
during such years, and for services that are normally provided by Grant Thornton
LLP in connection with statutory and regulatory filings or engagements, totaled
$149,000 and $154,000, respectively.
Audit-Related Fees. Fees billed to the Company by Grant Thornton LLP during
2005 and 2004 for audit-related services that were reasonably related to the
performance of the audit or review of the Company's financial statements and are
not reported under the preceding paragraph totaled $10,700 and $1,600,
respectively.
Tax Fees. Fees billed to the Company by Grant Thornton LLP during 2005 and
2004 for professional services rendered for tax compliance, tax advice and tax
planning totaled $37,000 and $18,900, respectively.
All Other Fees. Grant Thornton LLP was engaged by the Company during 2005 and
2004 to perform certain non-audit services. The aggregate fees billed by Grant
Thornton LLP for those other services during 2005 and 2004 were $16,400 and
11,700, respectively. In fiscal year 2005 and 2004, the fees of $16,400 and
$11,700, respectively, related to the audit of the Company's 401(k) plan.
The Audit Committee has considered whether Grant Thornton LLP's provision of
services other than professional services rendered for the audit and review of
our financial statements is compatible with maintaining Grant Thornton LLP's
independence, and has determined that it is so compatible.
The Audit Committee has been informed by Grant Thornton LLP that less than 50
percent of the hours expended on Grant Thornton LLP's engagement to audit our
financial statement for the fiscal year ended December 31, 2005 were attributed
to work performed by persons other than Grant Thornton LLP's full-time,
permanent employees.
All audit, audit-related, tax and other services were pre-approved by the
Audit Committee pursuant to applicable regulations. The Audit Committee
currently pre-approves all engagements of the Company's accountants to provide
both audit and non-audit services, and has not established formal pre-approval
policies or procedures. The Audit Committee did not approve any non-audit
services pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X during 2005.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION AND APPROVAL OF
THE SELECTION OF GRANT THORNTON LLP AS OUR INDEPENDENT ACCOUNTANTS FOR FISCAL
2006.
22
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report by reference therein.
As part of its oversight of the Company's financial statements, the Audit
Committee reviewed and discussed with both management and the Company's outside
auditors all financial statements prior to their issuance. Management advised
the Committee in each case that all financial statements were prepared in
accordance with generally accepted accounting principles, and reviewed
significant accounting issues with the Committee. These reviews included
discussion with the outside auditors of matters required to be discussed
pursuant to Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Committee also discussed with Grant Thornton LLP matters relating to its
independence, including a review of audit and non-audit fees and the written
disclosures made to the Committee pursuant to Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees).
In addition, the Committee reviewed major initiatives and programs aimed at
strengthening the effectiveness of the Company's internal control structure. As
part of this process, the Committee continued to monitor the scope and adequacy
of the Company's internal auditing program, reviewing staffing levels and steps
taken to implement recommended improvements in internal procedures and controls.
Taking all of these reviews and discussions into account, the Committee
recommended to the Board of Directors that the Board approve the inclusion of
the Company's audited financial statements in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Robert B. Kerr (Chair)
Norman S. Berson
David Gilfor
23
CORPORATE GOVERNANCE MATTERS
Stockholder Communications with the Board. Stockholders may send
communications to the Board of Directors in writing, addressed to the full Board
of Directors, individual directors or a specific committee of the Board of
Directors, care of Stanton Remer, Secretary, RCM Technologies, Inc., 2500
McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109. In general, all
stockholder communications sent to our Secretary for forwarding to the Board of
Directors, or to specified Board members, will be forwarded in accordance with
the sender's instructions. However, our Secretary reserves the right to not
forward to Board members any abusive, threatening or otherwise inappropriate
materials.
Director Attendance at Annual Meetings. The Company encourages all of the
directors to attend the annual meeting of stockholders. The 2005 Annual Meeting
of Stockholders was attended by all of the directors.
Code of Conduct and Code of Ethics. We have adopted a Code of Conduct
applicable to all of our directors, officers and employees. In addition, we have
adopted a Code of Ethics, within the meaning of applicable Commission rules,
applicable to our Chief Executive Officer, Chief Financial Officer and
Controller. Both our Code of Conduct and Code of Ethics are available free of
charge by sending a written request to Stanton Remer, Secretary, RCM
Technologies, Inc., 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey
08109. If we make any amendments to either of these Codes (other than technical,
administrative, or other non-substantive amendments), or waive (explicitly or
implicitly) any provision of the Code of Ethics to the benefit of our Chief
Executive Officer, Chief Financial Officer or Controller, we will disclose the
nature of the amendment or waiver, its effective date and to whom it applies in
the investor relations portion of our website at www.rcmt.com, or in a report on
Form 8-K that we file with the Commission.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals to be considered for inclusion in the proxy
materials for our annual meetings. For your proposal to be included in the proxy
materials for our 2007 annual meeting:
o you must submit your proposal in writing to Stanton Remer,
Secretary, RCM Technologies, Inc., 2500 McClellan Avenue, Suite
350, Pennsauken, New Jersey 08109;
o Mr. Remer must receive your proposal no later than December 22,
2006; and
o your proposal must comply with the rules and regulations of the
SEC.
If you wish to present a proposal at our 2007 annual meeting but not have the
proposal included in our proxy materials relating to that meeting, you must
notify our Secretary of such proposal. If we do not receive notice of your
proposal by March 7, 2007, the proposal will be deemed "untimely" for the
purposes of Rule 14a-4(c) of the Securities Exchange Act of 1934. If the
proposal is deemed "untimely," the persons named as proxies in next year's proxy
materials will be entitled to vote in their discretion with respect to the
proposal.
By Order of the Board of Directors,
/s/ Stanton Remer
-----------------------------------
Stanton Remer
Secretary
April 21, 2006
24
APPENDIX NUMBER 1
AUDIT COMMITTEE CHARTER
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
o Review financial information to be provided to stockholders and
others.
o Monitor the integrity of the Company's financial reporting
processing and systems of internal controls.
o Monitor the independence and performance of the Company's
independent auditors.
o Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as anyone in the Company. The Audit Committee
may retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
The Audit Committee shall be comprised of at least three directors, each of
whom shall be independent, as determined by the Board of Directors and in
accordance with the applicable provisions of the Marketplace Rules of the
National Association of Securities Dealers, Inc. applicable to the Nasdaq
Stock Market. Audit Committee members also shall satisfy the qualification
requirements of the Nasdaq Stock Market for audit committee membership.
The Board of Directors shall appoint the members of the Audit Committee. If
the Chairman of the Audit Committee is not designated or present, the members
of the Committee may designate a Chairman by majority vote of the Committee
membership.
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Chairman of the Audit Committee shall
prepare and/or approve an agenda in advance of each meeting. The Audit
Committee should meet privately in executive session at least annually with
management, the independent auditors and as a committee to discuss any matters
that the Audit Committee or each of these groups believe should be discussed.
In addition, the Audit Committee should communicate with management and the
independent auditors quarterly to review the Company's interim financial
statements and any significant findings based upon the auditors' review
procedures before the Company's Quarterly Report on Form 10-Q is filed with
the Securities and Exchange Commission.
III. Audit Committee Responsibilities and Duties
Review Procedures
In fulfilling its responsibilities, the Audit Committee is expected to
perform the following procedures:
1. Review and reassess the Charter of the Audit Committee at least
annually and recommend to the Board of Directors, as appropriate,
amendments to the Charter.
2. Review the Company's annual audited financial statements prior to
filing or distribution. In conducting its review, the Audit
Committee should discuss the following matters with management and
the independent auditors:
a. The independent auditors' audit of the financial statements and
its report thereon.
b. Any significant changes required in the independent auditors'
audit plan.
A1-1
c. Any significant difficulties encountered during the course of
the audit (including any restriction on the scope of work or
access to required information).
d. Any significant disagreement among management and the
independent auditors in connection with preparation of the
financial statements.
e. Other matters related to the conduct of the audit which are
communicated to the Audit Committee under generally accepted
auditing standards.
3. In consultation with the management and the independent auditors,
consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures
and the steps management has taken to monitor, control and report
such exposures. Review significant findings prepared by the
independent auditors together with management's responses.
4. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of
earnings and the Company's quarterly financial statements prior to
filing or distribution. Discuss any significant changes to the
Company's accounting principles and any items communicated by the
independent auditors in accordance with Statement on Auditing
Standards No. 61 (see Item 11). The Chairman of the Committee may
represent the entire Audit Committee for purposes of this review.
5. Meet with the independent auditors and management in separate
executive sessions to discuss any matters that the Audit Committee
or these groups believe should be discussed privately with the Audit
Committee.
Duties Relating to the Independent Auditors
The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors, as representatives of the stockholders.
Accordingly, the Audit Committee is expected to perform the following
activities with, or as they relate to, the independent auditors:
6. Review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of auditors when
circumstances warrant.
7. Approve the fees and other significant compensation to be paid to
the independent auditors.
8. Review and approve requests for significant management consulting
engagements to be performed by the independent auditors' firm and be
advised of any other significant study undertaken at the request of
management that is beyond the scope of the audit engagement letter.
9. On an annual basis, the Committee should review, and discuss with
the independent auditors, all significant relationships the
independent auditors have with the Company that could impair the
auditors' independence. This review should include, without
limitation, the following:
a. Receiving a formal written statement from the independent
auditor delineating all relationships between the auditor and
the Company, consistent with Independence Standards Board
Standard No. 1.
b. Actively engaging in a dialogue with the independent auditor
with respect to any disclosed relationships or services that
may have an impact on the objectivity and independence of the
independent auditor.
10. Review the independent auditors audit plan. This review should
include a discussion of scope, staffing, reliance upon management
and general audit approach.
11. Prior to releasing the year-end earnings, discuss, out of the
presence of management, the results of the audit with the
independent auditors. The discussion should include the matters set
forth in Item 2, as well as the following:
a. The adequacy of the Company's internal controls, including
computerized information system controls and security.
A1-2
b. Any related significant findings and recommendations of the
independent auditor together with management's responses to
them.
c. The independent auditor's judgment about the quality and
appropriateness of the Company's accounting principles as
applied in its financial reporting. Without limiting the
foregoing, the Audit Committee is expected to inquire as to the
independent auditors' views about whether management's choices
of accounting principles appear reasonable from the perspective
of income, asset and liability recognition, and whether those
principles are common practices or are minority practices.
Other Audit Committee Responsibilities
12. Recommend to the Board of Directors whether the Company's audited
financial statements should be included in the Company's Annual
Report on Form 10-K for filing with the Securities and Exchange
Commission.
13. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's proxy statement relating to the annual meeting of
stockholders.
14. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
15. Maintain minutes of meetings and periodically report to the Board of
Directors on its activities.
16. Periodically perform self-assessment of audit committee performance.
17. Annually review policies and procedures as well as audit results
associated with directors' and officers expense accounts and
perquisites. Annually review a summary of directors' and officers'
related party transactions and potential conflicts of interest.
18. Discuss and address with the independent auditors any significant
issues relative to overall board responsibility that, in the
judgment of the independent auditors, have been communicated to
management but have not been adequately resolved.
A1-3
APPENDIX NUMBER 2
RCM TECHNOLOGIES, INC.
2006 OMNIBUS EQUITY COMPENSATION PLAN
A2-1
TABLE OF CONTENTS
Section 1. Purpose ......................................................................................... A2-3
Section 2. Definitions ..................................................................................... A2-3
Section 3. Administration .................................................................................. A2-5
Section 4. Grants .......................................................................................... A2-6
Section 5. Shares of Stock Subject to the Plan ............................................................. A2-6
Section 6. Eligibility for Participation ................................................................... A2-7
Section 7. Options ......................................................................................... A2-7
Section 8. SARs ............................................................................................ A2-8
Section 9. Stock Units ..................................................................................... A2-8
Section 10. Performance Shares .............................................................................. A2-9
Section 11. Stock Awards .................................................................................... A2-9
Section 12. Other Stock-Based Awards ........................................................................ A2-10
Section 13. Qualified Performance-Based Compensation ........................................................ A2-10
Section 14. Deferrals ....................................................................................... A2-11
Section 15. Withholding of Taxes ............................................................................ A2-11
Section 16. Transferability of Grants ....................................................................... A2-11
Section 17. Consequences of a Change in Control ............................................................. A2-11
Section 18. Requirements for Issuance of Shares ............................................................. A2-12
Section 19. Amendment and Termination of the Plan ........................................................... A2-12
Section 20. Miscellaneous ................................................................................... A2-13
A2-2
RCM TECHNOLOGIES, INC.
2006 OMNIBUS EQUITY COMPENSATION PLAN
Section 1. PURPOSE
The purpose of the Plan is to provide designated (i) Employees of RCM and
its Subsidiaries, (ii) Non-Employee Directors of RCM and its Subsidiaries, and
(iii) Consultants who perform services for RCM and its Subsidiaries, with the
opportunity to receive grants of Options, SARs, Stock Units, Performance
Shares, Stock Awards and Other Stock-Based Awards. RCM believes that the Plan
will encourage the Participants to contribute materially to the growth of RCM,
thereby benefiting RCM's stockholders, and will align the economic interests
of the Participants with those of the stockholders. All capitalized terms
shall be as defined in Section 2 below.
Section 2. DEFINITIONS
Whenever used in this Plan, the following terms will have the respective
meanings set forth below:
(a) "Board" means the Board of Directors of RCM.
(b) "Change in Control" means the occurrence of any of the following
events, each of which shall be determined independently of the others:
(i) Any Person becomes a "beneficial owner," as such term is used in Rule
13d-3 promulgated under the Exchange Act, of 20% or more of RCM's stock
entitled to vote in the election of directors;
(ii) Individuals who are Continuing Directors cease to constitute a
majority of the members of the Board;
(iii) Stockholders of RCM adopt a plan of complete or substantial
liquidation or an agreement providing for the distribution of all or
substantially all of RCM's assets;
(iv) RCM is party to a merger, consolidation, other form of business
combination or a sale of all or substantially all of its assets, unless the
business of RCM is continued following any such transaction by a resulting
entity (which may be, but need not be, RCM) and the stockholders of RCM
immediately prior to such transaction (the "Prior Stockholders") hold,
directly or indirectly, at least two-thirds of the voting power of the
resulting entity (there being excluded from the voting power held by the Prior
Stockholders, but not from the total voting power of the resulting entity, any
voting power received by affiliates of a party to the transaction (other than
RCM) in their capacities as stockholders of RCM); provided, however, that a
merger or consolidation effected to implement a recapitalization of RCM (or
similar transaction) in which no Person acquires more than 10% of the combined
voting power of RCM's then outstanding securities shall not constitute a
Change in Control;
(v) There is a Change in Control of RCM of a nature that would be
required to be reported in response to item 1(a) of Current Report on Form 8-K
or item 6(e) of Schedule 14A of Regulation 14A or any similar item, schedule
or form under the Exchange Act, as in effect at the time of the change,
whether or not RCM is then subject to such reporting requirement;
(vi) RCM is a subject of a "Rule 13e-3 transaction" as that term is
defined in Exchange Act Rule 13e-3; or
(vii) There has occurred a "change in control," as such term (or any term
of like import) is defined in any of the following documents which is in
effect with respect to RCM at the time in question: any note, evidence of
indebtedness or agreement to lend funds to RCM, any option, incentive or
employee benefit plan of RCM or any employment, severance, termination or
similar agreement with any person who is then an employee of the Company.
Notwithstanding the foregoing, the Committee may modify the definition of a
Change in Control for a particular Grant as the Committee deems appropriate to
comply with section 409A of the Code.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
A2-3
(d) "Committee" means (i) with respect to Grants to Employees and
Consultants, the Compensation Committee of the Board or its delegate or
successor, or such other committee appointed by the Board to administer the
Plan or its delegate or successor and (ii) with respect to Grants made to
Non-Employee Directors, the Board or its delegate. Notwithstanding the
foregoing, with respect to Grants to Employees that are intended as "qualified
performance-based compensation" (as defined under section 162(m) of the Code),
as well as to Employees who are officers of RCM, the Committee shall consist
of two or more persons appointed by the Board, all of whom shall be "outside
directors" (as defined under section 162(m) of the Code and related Treasury
regulations) and "non-employee directors" as defined under Rule 16b-3
promulgated under the Exchange Act.
(e) "Company" means RCM and any Subsidiary.
(f) "Consultant" means an advisor or consultant who performs services for
the Company.
(g) "Continuing Directors" mean the members of the Board on the date of
adoption of this Plan, provided that any person becoming a member of the Board
subsequent to such date whose election or nomination for election was
supported by two-thirds of the directors who then comprised the Continuing
Directors shall be considered to be a Continuing Director.
(h) "Date of Grant" means the date a Grant is effective; provided, however,
that no retroactive Grants will be made.
(i) "Effective Date" means June 16, 2006, subject to approval by the
stockholders of RCM.
(j) "Employee" means an employee of the Company (including an officer or
director who is also an employee).
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, unless otherwise required by
any applicable provision of the Code or any regulations thereunder, (i) if the
Stock is listed on a national securities exchange or traded on Nasdaq, the last
reported sales price thereof on the relevant date or, if there were no trades on
that date, the last preceding date upon which a sale was reported; (ii) if the
Stock is not so listed or traded, the mean between the last reported "bid" and
"asked" price thereof, as reported on a national securities exchange or Nasdaq;
or (iii) if not so reported, as reported by the National Daily Quotation Bureau,
Inc. or as reported in a customary financial reporting service, as applicable,
and as the Committee determines.
(m) "Grant" means an Option, SAR, Stock Unit, Performance Share, Stock Award
or Other Stock-Based Award granted under the Plan.
(n) "Grant Letter" means the written agreement that sets forth the terms and
conditions of a Grant, including all amendments thereto.
(o) "Incentive Stock Option" means a stock option that is intended to meet
the requirements of section 422 of the Code, as described in Section 7.
(p) "Non-Employee Director" means a member of the Board, or a member of the
board of directors of a Subsidiary, who is not an employee of the Company.
(q) "Nonqualified Stock Option" means a stock option that is not intended to
meet the requirements of section 422 of the Code, as described in Section 7.
(r) "Option" means an Incentive Stock Option or Nonqualified Stock Option to
purchase shares of Stock at an Option Price for a specified period of time.
(s) "Option Price" means an amount per share of Stock purchasable under an
Option, as designated by the Committee.
(t) "Other Stock-Based Award" means any Grant based on, measured by or
payable in Stock (other than Grants described in Sections 7, 8, 9, 10 and 11),
as described in Section 12.
(u) "Parent" means a "parent corporation," as defined in section 424(e) of
the Code, of RCM.
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(v) "Participant" means an Employee, Consultant or Non-Employee Director
designated by the Committee to receive a Grant under the Plan.
(w) "Performance Shares" means an award of phantom units, representing one
or more shares of Stock, as described in Section 10.
(x) "Person" means as such term is used in sections 13(d) and 14(d) of the
Exchange Act; provided, however that, unless the Committee determines to the
contrary, the term shall not include (i) RCM, any trustee or other fiduciary
holding securities under an employee benefit plan of RCM, or any corporation
owned, directly or indirectly, by the stockholders of RCM in substantially the
same proportions as their ownership of stock of RCM, (ii) such individual as
the Board may determine, his or her issue and/or his or her heirs, executors,
administrators and successors (but excluding a successor as a result of a sale
for value), (iii) such corporation, partnership, limited liability company,
trust or other entity or association as the Board may determine, or (iv) the
Continuing Directors, individually or to the extent that they act or agree to
act in concert.
(y) "Plan" means this RCM Technologies, Inc. 2006 Omnibus Equity
Compensation Plan, as in effect from time to time.
(z) "RCM" means RCM Technologies, Inc., a Nevada corporation and any
successor thereto.
(aa) "Stock" means the common stock, par value $0.05 per share, of RCM or
such other securities of RCM as may be substituted for Stock pursuant to
Sections 5(d) or 17.
(bb) "SAR" means an award of a stock appreciation right, as described in
Section 8.
(cc) "Stock Award" means an award of Stock, as described in Section 11.
(dd) "Stock Unit" means an award of a phantom unit, representing one or
more shares of Stock, as described in Section 9.
(ee) "Subsidiary" means a "subsidiary corporation," as defined in section
424(f) of the Code, of RCM.
(ff) "Successor Participant" means the personal representative or other
person entitled to succeed to the rights of the Participant in accordance with
Section 16.
Section 3. ADMINISTRATION
(a) Committee. The Plan shall be administered and interpreted by the
Committee. Day to day administrative functions may be performed by employees
of RCM, as approved by the Committee.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the Employees, Consultants and Non-Employee Directors to whom
Grants shall be made under the Plan; (ii) determine the type, size and terms
of the Grants to be made to each Participant; (iii) determine the time when
the Grants will be made and the duration of any applicable exercise or
restriction period, including the criteria for exercisability and the
acceleration of exercisability and vesting; (iv) amend the terms of any
previously issued Grant, subject to the provisions of Section 19; (v) adopt
guidelines separate from the Plan that set forth the specific terms and
conditions for Grants under the Plan; and (vi) deal with any other matters
arising under the Plan. However, the Board may ratify or approve any Grants as
it deems appropriate and has the authority to administer the Plan. To the
extent that the Board makes Grants and administers the Plan, references in the
Plan to the "Committee" shall be deemed to refer to the Board.
(c) Committee Determinations. The Committee shall have full power and
express discretionary authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations,
agreements and instruments for implementing the Plan and for the conduct of
its business as it deems necessary or advisable, in its sole discretion. The
Committee's interpretations of the Plan and all determinations made by the
Committee pursuant to the powers vested in it hereunder shall be conclusive
and binding on all persons having any interest in the Plan or in any Grants
awarded hereunder. All powers of the Committee shall be executed in its sole
discretion, in the best interest of RCM, not as a fiduciary, and in keeping
with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
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Section 4. GRANTS
Grants under the Plan may consist of Options, SARs, Stock Units, Performance
Shares, Stock Awards and Other Stock-Based Awards. All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent with the Plan as the Committee deems appropriate and as
are specified in writing by the Committee in separate guidelines or to the
individual in the Grant Letter or an amendment to the guidelines or Grant
Letter. The Committee shall approve the form and provisions of each Grant
Letter. Grants under a particular Section of the Plan need not be uniform as
among the Participants. All Grants shall be made conditional upon the
Participant's acknowledgement, in writing or by acceptance of the Grant, that
all decisions and determinations of the Committee shall be final and binding
on the Participant, his or her beneficiaries, and any other person having or
claiming an interest under such Grant.
Section 5. SHARES OF STOCK SUBJECT TO THE PLAN
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of Stock that may be issued or transferred under
the Plan is 800,000 shares; provided, however, that no more than 400,000
shares of Stock, in the aggregate, may be issued pursuant to grants of Stock
Awards, Stock Units, Performance Shares and Other Stock-Based Awards. The
Shares may be authorized, but unissued, shares of Stock or reacquired shares
of Stock, including shares purchased by RCM on the open market for purposes of
the Plan. Grants paid in cash shall not count against the foregoing share
limits.
(b) Share Counting. For administrative purposes, when the Committee makes a
Grant payable in Stock, the Committee shall reserve shares of Stock equal to
the maximum number of shares of Stock that may be payable under the Grant. If
and to the extent Options or SARs granted under the Plan terminate, expire, or
are canceled, forfeited, exchanged or surrendered without having been
exercised or if any Stock Awards, Stock Units, Performance Shares or Other
Stock-Based Awards are forfeited or terminated, or otherwise not paid in full,
the shares subject to such Grants which have not been issued shall again be
available for purposes of the Plan. To the extent any Grants are paid in cash,
and not in shares of Stock, any shares previously reserved for issuance or
transfer pursuant to such Grants shall again be available for issuance or
transfer under the Plan. To the extent SARs are exercised under the Plan, the
total number of shares of Stock subject to the exercised portion of the SAR
shall count against the number of shares reserved for issuance under the Plan
if shares of Stock are paid out upon exercise of the SAR.
(c) Individual Limits. All Grants under the Plan shall be expressed in
shares of Stock. The maximum aggregate number of shares of Stock with respect
to which all Grants may be made under the Plan to any individual during any
fiscal year shall be 300,000 shares, subject to adjustment as described below.
The individual limit described in this subsection (c) shall apply without
regard to whether the Grants are to be paid in Stock or in cash. All cash
payments shall equal the Fair Market Value of the shares of Stock to which the
cash payment relates.
(d) Adjustments. If there is any change in the number or kind of shares of
Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares; (ii) by
reason of a merger, reorganization or consolidation; (iii) by reason of a
reclassification or change in par value; or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Stock as a class
without RCM's receipt of consideration, or if the value of outstanding shares
of Stock is substantially reduced as a result of a spinoff or RCM's payment of
an extraordinary dividend or distribution, the maximum number of shares of
Stock available for issuance under the Plan, the maximum number of shares of
Stock for which any individual may receive pursuant to Grants in any year, the
number of shares covered by outstanding Grants, the kind of shares to be
issued or transferred under the Plan, and the price per share or the
applicable market value of such Grants shall be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in
the kind or value of, issued shares of Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
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Section 6. ELIGIBILITY FOR PARTICIPATION
(a) Eligible Persons. All Employees, including Employees who are officers
or members of the Board, and all Non-Employee Directors shall be eligible to
participate in the Plan. Consultants are eligible to participate in the Plan
if they perform bona fide services for the Company, the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and the Consultants do not directly or indirectly promote or
maintain a market for RCM's securities.
(b) Selection of Participants. The Committee shall select the Employees,
Consultants and Non-Employee Directors to receive Grants and shall determine
the terms and conditions of the Grant and the number of shares of Stock
subject to each Grant.
Section 7. OPTIONS
(a) General Requirements. The Committee may grant Options to any Employee,
Consultant or Non-Employee Director upon such terms and conditions as the
Committee deems appropriate under this Section 7.
(b) Number of Shares. The Committee shall determine the number of shares of
Stock that will be subject to each Grant of Options to Employees, Consultants
and Non-Employee Directors.
(c) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options or Nonqualified Stock
Options or any combination of Incentive Stock Options and Nonqualified Stock
Options. Incentive Stock Options may be granted only to Employees of RCM or
its Parent or Subsidiaries. Nonqualified Stock Options may be granted to
Employees, Consultants and Non-Employee Directors.
(ii) The Option Price shall be determined by the Committee and may be
equal to or greater than the Fair Market Value of the shares of Stock subject
to the Grant on the Date of Grant; provided, however, that an Incentive Stock
Option may not be granted to an Employee who, at the Date of Grant, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of RCM or any Parent or Subsidiary, unless the Option Price is not less
than 110% of the Fair Market Value on the Date of Grant.
(d) Option Term. The Committee shall determine the term of each Option. The
term of an Option shall not exceed ten years from the Date of Grant. However,
an Incentive Stock Option that is granted to an Employee who, at the Date of
Grant, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of RCM, or any Parent or Subsidiary, may not have a
term that exceeds five years from the Date of Grant.
(e) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions as may be determined by the
Committee and specified in the Grant Letter. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(f) Termination of Employment or Service. Except as provided in the Grant
Letter, an Option may only be exercised while the Participant is employed by,
or providing service to, the Company. The Committee shall specify in the Grant
Letter under what circumstances and during what time periods a Participant may
exercise an Option after termination of employment or service.
(g) Exercise of Options. A Participant may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
RCM or its designated agent. The Participant shall pay the Option Price and
any withholding taxes for the Option (i) in cash or by certified or cashier's
check; (ii) with the approval of the Committee, by delivering shares of Stock
owned by the Participant and having a Fair Market Value on the date of
exercise equal to the Option Price or by attestation (on a form prescribed by
the Committee) to ownership of shares of Stock having an aggregate Fair Market
Value on the date of exercise equal to the Option Price; (iii) in cash, on the
T+3 settlement date that occurs after the exercise date specified in the
notice of exercise, provided that the Participant exercises the Option through
an irrevocable agreement with a registered broker and the payment is made in
accordance with procedures permitted by Regulation T of the Federal Reserve
Board and such procedures do not violate applicable law; or (iv) by such other
method as the Committee may approve, to the extent permitted by applicable
law. Shares of Stock used to exercise
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an Option pursuant to subsection (ii) shall have been held by the Participant
for the requisite period of time to avoid adverse accounting consequences to
RCM with respect to the Option. Payment for the shares pursuant to the Option,
and any required withholding taxes, must be received by the time specified by
the Committee depending on the type of payment being made.
(h) Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that if the aggregate Fair Market Value on the Date of Grant with
respect to which Incentive Stock Options are exercisable for the first time by
a Participant during any calendar year, under the Plan or any other stock
option plan of RCM or a Parent or Subsidiary, exceeds $100,000, then the
Option, as to the excess, shall be treated as a Nonqualified Stock Option.
Section 8. SARS
(a) General Requirements. The Committee may grant SARs to any Employee,
Consultant or Non-Employee Director, upon such terms and conditions as the
Committee deems appropriate under this Section 8. Each SAR shall represent the
right of the Participant to receive, upon settlement of the SAR, shares of
Stock or cash equal to the amount by which the Fair Market Value of a share of
Stock on the date of exercise of the SAR exceeds the base amount of the SAR as
described below in Section 8(c).
(b) Terms of SARs. The Committee shall determine the terms and conditions
of SARs and may grant SARs separately from or in tandem with any Option (for
all or a portion of the applicable Option). Tandem SARs may be granted either
at the time the Option is granted or any time thereafter while the Option
remains outstanding; provided, however, that in the case of an Incentive Stock
Option, SARs may be granted only at the time of the grant of the Incentive
Stock Option. The Committee will determine the number of SARs to be granted,
the base amount, the vesting and other restrictions applicable to SARs and the
period during which SARs will remain exercisable.
(c) Base Amount. The Committee shall establish the base amount of the SAR
at the time the SAR is granted; provided, however, that the base amount shall
not be less than the Fair Market Value of a share of Stock on the Date of
Grant.
(d) Payment With Respect to SARs. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, in Stock, or in a
combination of the two, in such proportion as the Committee deems appropriate.
For purposes of calculating the number of shares of Stock to be received,
Stock shall be valued at its Fair Market Value on the date of exercise of the
SAR. If shares of Stock are to be received upon exercise of an SAR, cash shall
be delivered in lieu of any fractional share.
(e) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain SARs after
termination of the Participant's employment or service, and the circumstances
under which SARs may be forfeited.
Section 9. STOCK UNITS
(a) General Requirements. The Committee may grant Stock Units to any
Employee, Consultant or Non-Employee Director, upon such terms and conditions
as the Committee deems appropriate under this Section 9. Each Stock Unit shall
represent the right of the Participant to receive a share of Stock or an
amount based on the value of a share of Stock. All Stock Units shall be
credited to accounts on RCM's records for purposes of the Plan.
(b) Terms of Stock Units. The Committee may grant Stock Units that are
payable if specified performance goals or other conditions are met, or under
other circumstances. Stock Units may be paid at the end of a specified period,
or payment may be deferred to a date authorized by the Committee. The
Committee shall determine the number of Stock Units to be granted and the
requirements applicable to such Stock Units.
(c) Payment With Respect to Stock Units. Payment with respect to Stock
Units shall be made in cash, in Stock, or in a combination of the two, as
determined by the Committee. The Grant Letter shall specify the maximum number
of shares that shall be paid under the Stock Units.
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(d) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain Stock Units
after termination of the Participant's employment or service, and the
circumstances under which Stock Units may be forfeited.
Section 10. PERFORMANCE SHARES
(a) General Requirements. The Committee may grant Performance Shares to an
Employee, Consultant or Non-Employee Director, upon such terms and conditions
as the Committee deems appropriate under this Section 10. Each Performance
Share shall represent the right of the Participant to receive a share of Stock
or an amount based on the value of a share of Stock, if specified performance
goals are met. All Performance Shares shall be credited to accounts on RCM's
records for purposes of the Plan.
(b) Terms of Performance Shares. The Committee shall establish the
performance goals and other conditions for payment of Performance Shares.
Performance Shares may be paid at the end of a specified performance or other
period, or payment may be deferred to a date authorized by the Committee. The
Committee shall determine the number of Performance Shares to be granted and
the requirements applicable to such Performance Shares.
(c) Payment With Respect to Performance Shares. Payment with respect to
Performance Shares shall be made in cash, in Stock, or in a combination of the
two, as determined by the Committee. The Committee shall establish in the
Grant Letter a target amount to be paid under a Performance Share based on
achievement of the performance goals.
(d) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain Performance
Shares after termination of the Participant's employment or service, and the
circumstances under which Performance Shares may be forfeited.
Section 11. STOCK AWARDS
(a) General Requirements. The Committee may issue or transfer shares of
Stock to an Employee, Consultant or Non-Employee Director under a Stock Award,
upon such terms and conditions as the Committee deems appropriate under this
Section 11. Shares of Stock issued or transferred pursuant to Stock Awards may
be issued or transferred for cash consideration or for no cash consideration,
and subject to restrictions or no restrictions, as determined by the
Committee. The Committee may establish conditions under which restrictions on
Stock Awards shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate, including restrictions based upon
the achievement of specific performance goals.
(b) Number of Shares. The Committee shall determine the number of shares of
Stock to be issued or transferred pursuant to a Stock Award and any
restrictions applicable to such shares.
(c) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain Stock
Awards after termination of the Participant's employment or service, and the
circumstances under which Stock Awards may be forfeited.
(d) Restrictions on Transfer. While Stock Awards are subject to
restrictions, a Participant may not sell, assign, transfer, pledge or
otherwise dispose of the shares of a Stock Award except upon death as
described in Section 16. Each certificate, or electronic book entry
equivalent, for a share of a Stock Award shall contain a legend giving
appropriate notice of the restrictions in the Grant. The Participant shall be
entitled to have the legend removed when all restrictions on such shares have
lapsed. The Committee may retain possession of any stock certificates for
Stock Awards until all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee determines
otherwise, the Participant shall have the right to vote shares subject to
Stock Awards and to receive any dividends or other distributions paid on such
shares during the restriction period. The Committee may determine that a
Participant's entitlement to dividends or other distributions with respect to
a Stock Award shall be subject to achievement of performance goals or other
conditions.
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Section 12. OTHER STOCK-BASED AWARDS
The Committee may grant other awards that are cash-based or based on,
measured by or payable in Stock to Employees, Consultants or Non-Employee
Directors, on such terms and conditions as the Committee deems appropriate
under this Section 12. Other Stock-Based Awards may be granted subject to
achievement of performance goals or other conditions and may be payable in
Stock or cash, or in a combination of the two, as determined by the Committee
in the Grant Letter.
Section 13. QUALIFIED PERFORMANCE-BASED COMPENSATION
(a) Designation as Qualified Performance-Based Compensation. The Committee
may determine that Stock Units, Performance Shares, Stock Awards or Other
Stock-Based Awards granted to an Employee shall be considered "qualified
performance-based compensation" under section 162(m) of the Code. The
provisions of this Section 13 shall apply to any such Grants that are to be
considered "qualified performance-based compensation" under section 162(m) of
the Code. To the extent that Grants of Stock Units, Performance Shares, Stock
Awards or Other Stock-Based Awards designated as "qualified performance-based
compensation" under section 162(m) of the Code are made, no such Grant may be
made as an alternative to another Grant that is not designated as "qualified
performance based compensation" but instead must be separate and apart from
all other Grants made.
(b) Performance Goals. When Stock Units, Performance Shares, Stock Awards
or Other Stock-Based Awards that are to be considered "qualified
performance-based compensation" are granted, the Committee shall establish in
writing (i) the objective performance goals that must be met; (ii) the period
during which performance will be measured; (iii) the maximum amounts that may
be paid if the performance goals are met; and (iv) any other conditions that
the Committee deems appropriate and consistent with the Plan and the
requirements of section 162(m) of the Code for "qualified performance-based
compensation." The performance goals shall satisfy the requirements for
"qualified performance-based compensation," including the requirement that the
achievement of the goals be substantially uncertain at the time they are
established and that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine whether and
to what extent the performance goals have been met. The Committee shall not
have discretion to increase the amount of compensation that is payable upon
achievement of the designated performance goals, but the Committee may reduce
the amount of compensation that is payable upon achievement of the designated
performance goals.
(c) Criteria Used for Objective Performance Goals. The Committee shall use
objectively determinable performance goals based on one or more of the
following criteria: Stock price, earnings per share of Stock, net earnings,
operating earnings, return on assets, stockholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specific
revenue goals, market penetration goals, geographic business expansion goals,
cost goals, or goals relating to acquisitions or divestitures. The performance
goals may relate to the Participant's business unit or the performance of RCM,
a Subsidiary, or RCM and its Subsidiaries as a whole, or any combination of
the foregoing. Performance goals need not be uniform as among Participants.
(d) Timing of Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the performance
period or during a period ending no later than the earlier of (i) 90 days
after the beginning of the performance period or (ii) the date on which 25% of
the performance period has been completed, or such other date as may be
required or permitted under applicable regulations under section 162(m) of the
Code.
(e) Certification of Results. The Committee shall certify and announce the
results for the performance period to all Participants after RCM announces
RCM's financial results for the performance period. The Committee shall
determine the amount, if any, to be paid pursuant to each Grant based on the
achievement of the performance goals and the terms of each Grant Letter.
(f) Death, Disability or Other Circumstances. The Committee may provide in
the Grant Letter that Grants shall be payable, in whole or in part, in the
event of the Participant's death or disability, a Change in Control or under
other circumstances consistent with the Treasury regulations and rulings under
section 162(m) of the Code.
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Section 14. DEFERRALS
The Committee may permit or require a Participant to defer receipt of the
payment of cash or the delivery of shares of Stock that would otherwise be due
to the Participant in connection with any Grant. The Committee shall establish
rules and procedures for such deferrals, which shall be consistent with the
requirements of section 409A of the Code and the corresponding Treasury
regulations and rulings.
Section 15. WITHHOLDING OF TAXES
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. RCM may (i) require that the Participant or other person
receiving or exercising Grants pay to the Company the amount of any federal,
state or local taxes that the Company is required to withhold with respect to
such Grants, or (ii) deduct from other wages paid by the Company the amount of
any withholding taxes due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a Participant
may elect to satisfy the Company's tax withholding obligation with respect to
Grants paid in Stock by having shares withheld, at the time such Grants become
taxable, up to an amount that does not exceed the minimum applicable
withholding tax rate for federal (including FICA), state and local tax
liabilities. In addition, with respect to any required tax withholding amount
that exceeds the minimum applicable withholding tax rate, the Committee may
permit a Participant to satisfy such tax withholding obligation with respect
to such excess amount by providing that the Participant may elect to deliver
to RCM shares of Stock owned by the Participant that have been held by the
Participant for the requisite period of time to avoid adverse accounting
consequences to RCM. The elections described in this subsection (b) must be in
a form and manner prescribed by the Committee and may be subject to the prior
approval of the Committee.
Section 16. TRANSFERABILITY OF GRANTS
(a) In General. Except as provided in this Section 16, only the Participant
may exercise rights under a Grant during the Participant's lifetime. A
Participant may not transfer those rights except by will or by the laws of
descent and distribution, or, with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Committee, pursuant to
a domestic relations order. When a Participant dies, the Successor Participant
may exercise such rights in accordance with the terms of the Plan. A Successor
Participant must furnish proof satisfactory to RCM of his or her right to
receive the Grant under the Participant's will or under the applicable laws of
descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
the Committee may provide in a Grant Letter that a Participant may transfer
Nonqualified Stock Options to family members or other persons or entities,
consistent with applicable securities laws, according to such terms as the
Committee may determine; provided that the Participant receives no
consideration for the transfer of a Nonqualified Stock Option and the
transferred Nonqualified Stock Option shall continue to be subject to the same
terms and conditions as were applicable to the Nonqualified Stock Option
immediately before the transfer.
Section 17. CONSEQUENCES OF A CHANGE IN CONTROL
(a) Assumption of Grants. Upon a Change in Control where RCM is not the
surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding
Options and SARs that are not exercised shall be assumed by, or replaced with
comparable options and rights by, the surviving corporation (or a parent or
subsidiary of the surviving corporation), and other Grants that remain
outstanding shall be converted to similar grants of the surviving corporation
(or a parent or subsidiary of the surviving corporation).
(b) Acceleration of Exercisability/Vesting. In the event of a Change in
Control, Grants will automatically become fully exercisable and/or vested, as
applicable, but only with respect to those Participants who, in the good faith
determination and sole discretion of the Committee, are likely to have their
relationship with the Company or a successor to the Company terminated
(including a constructive termination through a significant decrease in
authority, responsibility or overall total compensation) as a result of such
Change in Control. This subsection (b) shall be in addition to, and not in
lieu of, the actions the Committee may take pursuant to subsection (c) below.
A2-11
(c) Other Alternatives. Notwithstanding the foregoing, in the event of a
Change in Control, the Committee may take any of the following actions with
respect to any or all outstanding Grants, without the consent of any
Participant: (i) determine that outstanding Options and SARs shall accelerate
and become exercisable, in whole or in part; (ii) determine that the
restrictions and conditions on outstanding Stock Awards shall lapse, in whole
or in part; (iii) provide that Participants holding outstanding Performance
Shares shall receive payment, in whole or in part, in settlement of such
Performance Shares, in an amount determined by the Committee, based on the
Participant's target payment for the performance period and the portion of the
performance period that precedes the Change in Control; (iv) determine that
outstanding Stock Units shall become payable, in whole or in part, in cash,
Stock or other property in an amount not less than their target amount, as
determined by the Committee; (v) provide that Other Stock-Based Awards shall
become fully payable, in whole or in part, in cash, Stock or other property,
in amounts determined by the Committee; (vi) the Committee may require that
Participants surrender their outstanding Options and SARs in exchange for a
payment by RCM, in cash, Stock or other property, as determined by the
Committee, in an amount equal to the amount by which the then Fair Market
Value subject to the Participant's unexercised Options and SARs exceeds the
Option Price of the Options or the base amount of the SARs, as applicable;
(vii) after giving Participants an opportunity to exercise their outstanding
Options and SARs, the Committee may terminate any or all unexercised Options
and SARs at such time as the Committee deems appropriate; and (viii) with
respect to Participants holding Stock Units, Performance Shares or Other
Stock-Based Awards, the Committee may determine that such Participants shall
receive a payment in settlement of such Stock Units, Performance Shares or
Other Stock-Based Awards, in such amount and form as may be determined by the
Committee. Such acceleration, surrender, termination or settlement shall take
place as of the date of the Change in Control or such other date as the
Committee may specify.
Section 18. REQUIREMENTS FOR ISSUANCE OF SHARES
No shares of Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance of such shares have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any Grant made to
any Participant hereunder on such Participant's undertaking in writing to
comply with such restrictions on his or her subsequent disposition of such
shares of Stock as the Committee shall deem necessary or advisable, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Stock issued or transferred
under the Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
Section 19. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without approval of
the stockholders of RCM if such approval is required in order to comply with
the Code or applicable laws, or to comply with applicable stock exchange
requirements. No amendment or termination of this Plan shall, without the
consent of the Participant, impair any rights or obligations under any Grant
previously made to the Participant, unless such right has been reserved in the
Plan or the Grant Letter, or except as provided in Section 20(b) below.
(b) No Repricing Without Stockholder Approval. Notwithstanding anything in
the Plan to the contrary, without the prior approval of RCM's stockholders, no
Grant under the Plan may be repriced, replaced, regranted through cancellation
or modified if the effect would be to reduce the exercise price for the shares
underlying such Grant; provided, however, that the foregoing shall not apply
to any adjustment made to a Grant pursuant to Section 5(d) of the Plan. In
addition, without the prior approval of RCM's stockholders, the Committee may
not cancel an outstanding Grant that is underwater for the purpose of granting
a replacement Grant of a different type.
(c) Stockholder Approval for "Qualified Performance-Based Compensation." If
Stock Units, Performance Shares, Stock Awards or Other Stock-Based Awards are
granted as "qualified performance-based compensation" under Section 13 above,
the Plan must be reapproved by RCM's stockholders no later than the first
stockholders meeting that occurs in the fifth year following the year in
A2-12
which the stockholders previously approved the provisions of Section 13, if
additional Grants are to be made under Section 13 and if required by section
162(m) of the Code or the regulations thereunder.
(d) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its Effective Date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval
of the stockholders. The termination of the Plan shall not impair the power
and authority of the Committee with respect to an outstanding Grant.
Section 20. MISCELLANEOUS
(a) Grants in Connection with Corporate Transactions and Otherwise. Nothing
contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Grants to employees
thereof who become Employees, or for other proper corporate purposes, or
(ii) limit the right of RCM to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason
of a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving RCM in substitution for a grant made
by such corporation. The terms and conditions of the substitute Grants may
vary from the terms and conditions required by the Plan and from those of the
substituted stock incentives. The Committee shall prescribe the provisions of
the substitute Grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of RCM to issue or transfer shares of Stock under Grants shall be
subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to
section 16 of the Exchange Act, it is the intent of RCM that the Plan and all
transactions under the Plan comply with all applicable provisions of Rule
16b-3 or its successors under the Exchange Act. In addition, it is the intent
of RCM that the Plan and applicable Grants comply with the applicable
provisions of sections 162(m), 409A and 422 of the Code. To the extent that
any legal requirement of section 16 of the Exchange Act or sections 162(m),
409A or 422 of the Code as set forth in the Plan ceases to be required under
section 16 of the Exchange Act or sections 162(m), 409A or 422 of the Code,
that Plan provision shall cease to apply. The Committee may revoke any Grant
if it is contrary to law or modify a Grant to bring it into compliance with
any valid and mandatory government regulation. The Committee may also adopt
rules regarding the withholding of taxes on payments to Participants. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Enforceability. The Plan shall be binding upon and enforceable against
RCM and its successors and assigns.
(d) Funding of the Plan; Limitation on Rights. This Plan shall be unfunded.
Neither RCM nor any other Company shall be required to establish any special
or separate fund or to make any other segregation of assets to assure the
payment of any Grants under this Plan. Nothing contained in the Plan and no
action taken pursuant hereto shall create or be construed to create a
fiduciary relationship between RCM or any other Company and any Participant or
any other person. No Participant or any other person shall under any
circumstances acquire any property interest in any specific assets of RCM or
any other Company. To the extent that any person acquires a right to receive
payment from RCM hereunder, such right shall be no greater than the right of
any unsecured general creditor of RCM.
(e) Rights of Participants. Nothing in this Plan shall entitle any
Employee, Consultant, Non-Employee Director or other person to any claim or
right to receive a Grant under this Plan. Neither this Plan nor any action
taken hereunder shall be construed as giving any individual any rights to be
retained by or in the employment or service of the Company.
(f) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Grant. The Committee shall determine
whether cash, other awards or other property shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
A2-13
(g) Employees Subject to Taxation Outside the United States. With respect
to Participants who are subject to taxation in countries other than the United
States, the Committee may make Grants on such terms and conditions as the
Committee deems appropriate to comply with the laws of the applicable
countries, and the Committee may create such procedures, addenda and subplans
and make such modifications as may be necessary or advisable to comply with
such laws.
(h) Governing Law. The validity, construction, interpretation and effect of
the Plan and Grant Letters issued under the Plan shall be governed and
construed by and determined in accordance with the laws of the State of
Nevada, without giving effect to the conflict of laws provisions thereof.
A2-14
APPENDIX NUMBER 3
PROXY
RCM TECHNOLOGIES, INC.
2500 McCLELLAN AVENUE
SUITE 350
PENNSAUKEN, NEW JERSEY 08109-4613
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a stockholder of RCM Technologies, Inc. (the
"Company"), hereby appoints Leon Kopyt and Stanton Remer, and each of them, as
the true and lawful attorneys and proxies of the undersigned, with full power of
substitution, for and in the name of the undersigned, to vote and otherwise act
on behalf of the undersigned at the Annual Meeting of Stockholders of the
Company to be held at the law offices of Morgan, Lewis & Bockius LLP, 1701
Market Street, Philadelphia, Pennsylvania on Thursday, June 15, 2006, at 6:00
p.m. local time, and at any adjournment or adjournments thereof, with respect to
all shares of the Company's Common Stock which the undersigned would be entitled
to vote, with all powers the undersigned would possess if personally present, on
the following matters:
|X| Please mark votes as in this example.
1. The election of one Class A director, to serve until the expiration of his
term and until his successor is elected and qualified or until his earlier
resignation or removal.
Nominee: Norman S. Berson
FOR WITHHELD
Norman S. Berson |__| |__|
2. The approval of the RCM Technologies, Inc. 2006 Omnibus Equity Compensation
Plan.
FOR AGAINST ABSTAIN
|__| |__| |__|
3. Ratification of the appointment by the Board of Directors of Grant Thornton
LLP as independent accountants for the Company for the fiscal year ending
December 30, 2006.
FOR AGAINST ABSTAIN
|__| |__| |__|
IN THEIR DISCRETION, THE NAMED PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED
STOCKHOLDER. IF THE STOCKHOLDER GIVES NO DIRECTION, THE PROXY WILL BE VOTED
"FOR" BOTH NOMINEES FOR DIRECTOR, "FOR" PROPOSALS 2 AND 3, AND IN THE PROXIES'
DISCRETION ON ANY OTHER MATTERS TO COME BEFORE THE MEETING.
Signature: _________________ Signature: _________________
Title: _________________ Title: _________________
Date: _________________ Date: _________________
The undersigned hereby acknowledges receipt of the notice of Annual Meeting, the
proxy statement furnished in connection therewith and the annual report to
stockholders and hereby ratifies all that the said attorneys and proxies may do
by virtue hereof.
PLEASE DATE THIS PROXY AND SIGN ABOVE exactly as your name appears on this
proxy. If more than one person owns the shares, each owner should sign. If you
are signing this proxy as an attorney, administrator, executor, guardian or
trustee, please include your title. If you are signing this proxy on behalf of a
corporation, please include your title.